But this time around, a different dynamic is at play. Interest rates have risen swiftly, not because investors are betting on an economic surge, but because accelerating inflation is forcing the Federal Reserve to act quickly to try to rein in price pressures. Some investors worry the Fed’s interest-rate increases may even tip the economy into recession.
That has drawn investors into shares of big dividend payers, which promise to deliver a steady stream of cash in the near term. A bonus? Many dividend payers are in industries like utilities, telecommunications, and consumer staples, which consumers tend to rely on year-round, regardless of the economic environment. That has made them especially attractive to investors who are worried the Fed won’t be able to combat inflation without significantly raising unemployment.
“I don’t want high risk. I want a cereal company with a dividend that I know is coming,” said Steve Chiavarone, senior portfolio manager and head of multiasset solutions at Federated Hermes.
Fruit Loops maker Kellogg Co. , which has a dividend yield of 3.4%, is up 5.3% this year.Search for Yield Pushes Investors into Dividend Paying Stocks – WSJ