High-yield stocks favoured?

new york — High-dividend-yield stocks such as telecoms and utilities are looking more tempting as investors become increasingly nervous about the outlook for equities and as US Treasury yields hover near a 10-month low.

The wide spread between the 10-year Treasury note and highdividend payers, coupled with these stocks’ reputation as a safer play, could tempt investors to move away from high-growth names. A nuclear test from North Korea on Sunday rattled investors when markets opened on Tuesday after the extended holiday weekend, pushing the yield on benchmark 10-year Treasury notes to a 10-month low.

“If rates can stay down here you will see people begin to return to those days of owning high dividend stocks,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

Investors typically prize high dividend players in a low rate, low growth environment, as they search for high yielding and stable instruments. Fund managers already seem to be picking up some of these stocks. On a sector basis, weekly inflows for utilities were among the strongest, relative to assets under management, at 1.9 per cent according to data from Credit Suisse through September 1.

Stocks in the telecom and utilities sector have some of the highest dividend yields in the S&P 500. Telecom CenturyLink has a dividend yield of 11.4 per cent, top in the index. Utilities FirstEnergy and Southern both have dividend yields above 4.5 per cent.

Meckler said investors are now more confident these sectors can compete with the yield on the 10year at such a low level. —