Though there was a muted reaction from investors following release of the FOMC minutes yesterday afternoon, Federal Reserve Chairman Ben Bernanke’s comments during a Q&A at an event in Boston shot a wave of euphoria into the financial markets after the close last night and into today. Bernanke reiterated his commitment to keeping a loose monetary policy through the Fed’s zero interest rate policy (ZIRP) and quantitative easing (QE). As a result of these comments, gold, bonds, and stocks rallied significantly in the day’s trading.
Having said that, not all stocks were winners today. Shares of Yum! Brands (YUM), Commerce Bancshares (CBSH), and Pricesmart (PSMT) fell after all three companies released disappointing earnings. However, shares of Rocky Mountain Chocolate Factory (RMCF) rose after it released better-than-expected first quarter earnings.
Be sure to check the Dividend Daily for all the latest earnings reports, analyst moves, and much more.Two New Dividend Stocks Added to Recommended List
If you did not read the e-mail alert we sent out earlier, be sure to check out the two new dividend stocks that we added to our “Best Dividend Stocks List” this morning. Our list of recommended stocks now has an average dividend yield of 3.85%, compared to the S&P 500′s average dividend yield of 1.92%.We’ll Keep Playing Along
Despite hints over the past couple of months that the Federal Reserve might soon scale back its bond-buying and increase interest rates, the dovish commentary coming from Fed governors and presidents in recent weeks makes it seem as though the powers that be are committed to keeping interest rates as low as they possibly can in the coming months and even years. If this is indeed the case and the Fed does not suddenly change its policy stance, then we see a runway where certain dividend stocks could continue to perform well for income investors.
As such, we added two new stocks to our Best Dividend Stocks List today because we a see a continued path of low interest rates, which makes dividend investments all the more attractive for savers and wealth builders. We have held back from making recommendations over the past couple of months because of the uncertain monetary policy coming from the Fed, but now we see these certain stocks performing well if rates do indeed remain low. However, this does not mean that we are encouraging initiating positions in all sorts of dividend paying stocks just because they have attractive yields; investors must still be wary of chasing yield when other fundamentals are not there.
Nonetheless, even if the Federal Reserve wishes to keep interest rates low in order to stimulate the economy, it only can do so much to achieve this goal. The Fed has more control over the short-term interest rates, but when it comes to long-term interest rates the Fed is at the mercy of traders and investors as they buy and sell Treasuries and other bonds. So while the Fed can buy up billions of dollars worth of bonds each month in attempt to drive up bond prices and push yields lower, if the bond market rebels against this policy then there is nothing the Fed can do. Because of this chance of rising interest rates — even if the Fed wishes otherwise — we have recommended stocks that we think will have the ability to perform well even if rates do spike.
In the end, we’ll play along with the current market and policy environment as best we can. However, we are always ready to adjust our views based on the ever changing economic environment.
Thanks for reading, and we’ll see you tomorrow!
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