Dividend Stocks are Still Great in Your Portfolio

Is it true that when interest rates go up, and other factors together all conspiring to kill off dividend stocks? We hear this every year and there are always warnings to start dumping dividend stocks but each year the opposite happens.

This year, 2015, is no exception as dividend stocks continue strong.

This sector is off to a strong start as they enjoying good returns and outpacing the S&P 500. Usually, dividend stocks are shunned by those looking for higher risk class assets thanks to low rate of returns, the opposite is happening right now and winning over some diehard naysayers. Over the last year, apart from Japan, dividend yield assets have outperformed in all major markets. In the Eurozone, United Kingdom and the United States they are outperformed their underlying markets by 3.8 percent in the EU, 5.6 percent in the UK and three percent in the US.

There is a new monetary easing policy in the Eurozone, aka quantitative easing (QE), as well as a reality that the European Central Bank (ECB) will now keep rates low. This makes dividend stocks in those markets very attractive towards investors. Plus, with easing inflation setting in thanks to falling oil prices, there is the strong probability other central banks, including the US Fed will, will keep rates super low.

This means investors are more than willing to pay a premium for stocks that offer a nice income, even with a stock price that does not move very well.

There are several key reason to own dividend stocks:

1. Low yields. Look at the 30 Year Treasury Note at 1.30 percent.

2. There is monetary policy easing

3. Dividend stocks are valued nicely

4. We are seeing solid capital inflow to these asset classes

5. These companies tend to show strong earnings

6. Eurozone companies, thanks to a new QE program, will be divesting more dividends

Throughout January there was a nice increase in annual cash payments from strong dividend companies. That increase came in at ten percent. Several companies like General Motors (GM: NYSE) and Twenty First First Century Fox (FOX: Nasdaq) have announced significant increases with their earnings reports. Plus February is the month that sees the most in dividend increases. Banks, like JP Morgan Chase (JPM: NYSE) will announce dividend plans in March.

One of the strongest companies to watch is Exxon Mobile (XOM: NYSE) which pays a nice three percent dividend now, is more than most likely to increase its dividend in April.

Dividend stocks are nice to have in one’s portfolio as they help round it out. They also, if you pick the right companies, pay a very nice income level.