It was a stunning turn of events for a once great company, and an important lesson for high -
yield stock investors.
Most importantly for high -
yield stock investors, Seadrill was paying one of the best dividends in the entire global stock market.
Back in 2014 offshore drilling giant Seadrill (NYSE: SDRL) was a darling for high -
yield stock investors.
Not exact matches
While
investors will have to find
stocks with higher
yields, pay more for them and take on more risk in bonds, the biggest change in a permanently low - rate world is that people will need to set aside more of every paycheque if they want to keep the same goal for retirement income.
In other words, because
investors can not generate a sufficient return from low -
yielding bonds, they turn to
stocks as their only alternative.
When bond
yields rise,
investors often start weighing whether
stocks are the only game in town for return.
Power down A hunt for dividend income led
investors to pour money into high -
yielding utility
stocks in 2016.
At some point,
investors who are conflating high -
yielding consumer staples
stocks with bonds or who are taking interest rate risk in long - dated Treasurys will see drawdowns as well.
Total return to
investors includes both price appreciation and dividend
yield to an
investor in the company's
stock.
While these companies are unsurprisingly out of favour with many
investors — a lot simply won't buy these companies on moral grounds — they think the sector's high
yields, low correlation with market cycles and steady earnings will make
investors give them another look, and then
stock prices will appreciate.
Yields are going to rise, says James Morrow, manager of Fidelity Investments» U.S. Dividend Fund, and income - seeking
investors should buy in before the masses rush into these
stocks.
Investors were watching the report closely after fears of surging inflation helped send the
stock market lower and bond
yields higher.
Also, Ablin added a large portion of the recent rally involved a rotation from bonds into
stocks as low interest rates forced
investors to seek
yield in the
stock market.
So the decision to buy one
stock or another comes down to comparing valuations and whether an
investor is looking for
yield.
Higher
yields generally hurt
stock prices by making bonds more appealing to
investors.
With
stocks trading near all - time highs and bond
yields still relatively low, some
investors have turned to alternative asset classes.
Treasury prices cut earlier losses on Monday, pushing
yields slightly lower, after
stocks fell sharply, pushing
investors into haven assets like government bonds.
Treasury
yields pull back sharply Thursday after the reemergence of trade tensions between global powerhouses rattles
investors, pushing
stocks down and bond prices up
Our products are designed to help subscribers profit in bull or bear markets, freeing us to offer
investors our genuine views of the markets, with quality recommendations that can
yield strong profits whether
stocks are rising or falling.
At some point, provided that dividend is safe and
investors are convinced it is going to be maintained, the dividend
yield on the
stock itself is going to be so attractive that it brings in buyers from the sidelines, people who otherwise can not stand to see the
yield right there in front of them without doing something about it.
In essence,
investors who reinvest their dividends accumulate more shares during
stock market collapses as the dividend
yield expanding allows them to gobble up more equity with each dividend check they shove back into their account or dividend reinvestment plan.
Is n`t — do n`t you think there will come a time when the
yield on the 10 year will start to provide some competition from the
yields in the
stock market and that will have a problem for equity
investors?
This observation led
investors to bid up
stock prices and push down dividend
yields and this proved — more or less — sustainable.
There is no doubt that, based on pure, cold, logical data,
stocks are the single best long - term performing asset class for disciplined
investors who are not swayed by emotion, focus on earnings and dividends, and never pay too much for a
stock, often as measured on a conservative beginning earnings
yield relative to the Treasury bond
yield basis.
For example, some
investors may have taken on more risk in their portfolios in recent years by moving into lower - quality bonds or dividend
stocks, in an attempt to generate additional
yield.
And the Fed increasing interest rates, plus rising bond
yields, typically makes
stock investors nervous.
The potential counter weights that could cap the 10 - year
yield would be a negative
stock market reaction that drives
investors to bonds; lower interest rates outside the U.S. that make the U.S. debt relatively more attractive, and good demand for longer - dated securities from insurers and others.
There are a multitude of reasons as to why this occurs but it's a powerful enough force that many
investors have done quite well for themselves over an investing lifetime by focusing on dividend
stocks, specifically one of two strategies - dividend growth, which focuses on acquiring a diversified portfolio of companies that have raised their dividends at rates considerably above average and high dividend
yield, which focuses on
stocks that offer significantly above - average dividend
yields as measured by the dividend rate compared to the
stock market price.
U.S. Treasury
yields US10YT = RR fell to two - month lows as
investors fled sliding
stocks for safety ahead of Friday's closely watched jobs report.
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Yield Bond Index Fund (CAD - Hedged)(«XHY»), iShares U.S. IG Corporate Bond Index Fund (CAD - Hedged)(«XIG»), iShares DEX HYBrid Bond Index Fund («XHB»), iShares S&P / TSX North American Preferred
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investors.
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yields.
Investors have long known that a high - dividend strategy has been subject to various «
yield traps,» such as those stemming from temporarily high earnings, high payouts or falling
stock prices.
A dividend reinvestment program (DRIP) is an option available to people invested in companies with
stock that
yields dividends, which are a portion of a company's profits that are regularly passed along to
investors.
With Group of Seven (G7) sovereign bond
yields at historically low levels, some income - seeking
investors have turned to higher - volatility securities like dividend - paying
stocks in an attempt to capture additional income.
Investors often buy those
stocks when bond
yields are falling.
Investors need to be careful and make sure they do more research beyond just looking at the dividend
yield of a
stock.
Utilities and real estate
stocks compete with treasuries for
investors looking for
yield.
With rates at historic lows, many
investors have used high - dividend
stocks, rather than low -
yielding bonds, in pursuit of income.
And even if the indicator was valid (counterfactually), the article asks readers to accept as given that earnings are properly reported here, that they will grow by nearly 50 % over the coming year, and that
investors are willing to key the long - term return they require from
stocks to the
yield on 10 - year bonds, which has been abnormally depressed in a flight to safety.
Finally, the Fed's easy - money policies have pushed
investors into the
stock market because bond
yields are so low.
In their search for
yield,
investors have bid up dividend
stocks to unprecedented levels.
Along with falling
yields,
investors who want to buy income - producing
stocks these days are facing rich valuations.
Benchmark
stock indexes were also volatile Wednesday, as
investors mulled the impact of rising bond
yields and disappointing earnings.
Instead,
investors can sit in a high -
yielding stock with great expectations while the market makes up its mind.
«Solid dividend payers like AWK will continue to command a premium in the market as
investors are looking for any type of stable
yield,» said investment instructor and small - cap
stock expert Jason Bond.
As ZIRP sent bond
yields south,
investors piled into dividend - paying
stocks as a way to generate returns.
This, in conjunction with the
stock's impressive
yield and above - average appreciation potential, make it appealing to
investors of all ilks.
Lastly, this neutrally ranked
stock's 3.1 % dividend
yield is likely to appeal to income - seeking
investors.
The optics sector may be overlooked by many
investors, but a handful of
stock picks in the space could
yield attractive returns, according to Loop Capital Markets.
With the Fed no longer buying bonds and
investors expecting greater inflation, analysts say higher
yields could make bonds more attractive than
stocks.