In a year which has seen the Morningstar US Market Index decline nearly 19% amid steep price pressure across global equity and fixed income markets, US dividend-paying stocks have defied conventional wisdom to represent a rare bright spot for investors.
The Morningstar Dividend Yield Focus Index, which provides exposure to high quality US companies with strong financial health and the ability to sustain above average dividend payouts, has risen nearly 5% year-to-date.
This favorable performance for dividend-paying stocks in 2022 runs counter to conventional wisdom, which holds that rising rates make fixed income more attractive than equity income. Yet 2022 has been anything but typical, with equity and fixed income both down sharply.
Dan Lefkovitz, Strategist, Morningstar Indexes
“The relationship between interest rates and dividend paying stocks looks about as predictable as the one between stocks and bonds, both of which are down this year after having been inversely correlated in the past. Investing isn't like physics, with its immutable laws. The forces that move markets are multifaceted and fluid. Equity income investors should focus more on fundamental factors like dividend durability and less on macroeconomics.”
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