Dividend Climate Change: What Happens When Interest Rates Rise?

The past few decades have provided excellent opportunities for dividend investors, but that could change. It may not be next week, next month, or even next year, but what happens when interest rates rise? I was reviewing the research Yale University Professor Robert Shiller has compiled on historical stock market data, specifically how dividend yields compared to interest rates in two time periods. I looked at the 1970s when both short and long-term interest rates soared to levels hard to even envision, and the period from 1985 on. First, here’s a look at dividend yields and interest rates from 1965 to 1985. I’ve included both the ten-year bond yield, and the rate for six-month CDs. It would have seemed mighty tempting to ditch stocks for CDs back when you could get double-digit rates for simply putting your money in a bank. But it was a whole different world once the... Read more

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