Dividends Are Hot

Bloomberg notes an interesting development in the market—there’s been a rush towards safety. Since September, the Low Vol ETF (SPLV) is up more than 50%. In fact, over the last month, the SPLV has been more volatile than the rest of the market. As a result, dividend-paying stocks are going for some pretty pricey valuations.

Whatever’s happening, it’s pushed dividend paying stocks to a record price-earnings ratio, 9.4 percent above the four-year average. The 20.4 P/E of these otherwise slow-growing companies make them look more like technology stocks, which at 19.1 times earnings are now trading at a lower valuation.

The demand for yield stocks has been enhanced by a dovish Federal Reserve. The S&P 500 Dividends Aristocrats index has gained 7.1 percent this year and reached a record on Tuesday. The S&P 500 has posted a 2.3 percent gain over the same period. The iShares High Dividend ETF also reached its highest net asset value on Tuesday.

Posted by Eddy Elfenbein on April 25th, 2016 at 12:58 pm

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