Dividend Investing and Higher Interest Rates: BDCs vs. Mortgage REITs

There seems to be more discussion of the prospect and timing of a turn in Federal Reserve policy. From an investor's perspective, it is important to develop a sense of how this will impact different securities. It is well known that long-term fixed rate bonds tend to lose value as prevailing interest rates increase, and an initial assumption might be made that bond-like equities which are attractive primarily because of dividend yield would behave the same way. Two categories of equities I have followed closely bear scrutiny in this regard. Both Business Development Companies (BDCs) and Agency Mortgage REITs are "bond-like" in that their primary assets are debt instruments and they are bought primarily by yield oriented investors.Before going any further, I should note that I am not in the camp of investors who believe that a federal funds rate increase is imminent. The economy is still fragile, the... Read more