Dividend Stocks Surge as Investors Seek Stability Ahead of Fed Decision
Investors Shift Focus to Dividend Stocks Ahead of Fed Decision
As the Federal Reserve’s September interest rate decision looms, investors are increasingly turning their attention to dividend stocks, according to market experts. Paul Baiocchi of SS&C ALPS Advisors supports this strategy, anticipating a potential easing of rates by the Fed.
A noticeable shift has been observed from money markets and fixed income to dividend stocks, particularly in leveraged companies that could benefit from a declining interest rate environment.
ALPS, a prominent player in the exchange-traded fund (ETF) market, offers several dividend-focused ETFs, including the ALPS O’Shares U.S. Quality Dividend ETF (OUSA) and the ALPS O’Shares U.S. Small-Cap Quality Dividend ETF (OUSM). Both funds are overweight in health care, financials, and industrials compared to the S&P 500, while excluding energy, real estate, and materials sectors due to their volatility.
Baiocchi emphasizes the importance of avoiding sectors with price and fundamental volatility to achieve the goal of drawdown avoidance. “Our focus is on dividends that are durable, growing, and well-supported by fundamentals,” he stated.
Mike Akins of ETF Action views OUSA and OUSM as defensive strategies, citing the generally clean balance sheets of the stocks involved. He also noted the rising popularity of the dividend category in ETFs, attributing it to the perceived viability of companies that consistently pay dividends over the years.
As the market awaits the Fed’s decision, the trend toward dividend stocks continues to gain momentum, reflecting investors’ search for stability and potential growth in an uncertain economic landscape.
