Research Paper Shows High Dividend Paying Stocks Outperformed The S&P 500 In Rising Rate Environments

Jan 12, 2016, 10:55 ET from Global X Management Company LLC

NEW YORK, Jan. 12, 2016 /PRNewswire/ -- Global X ETFs has released a study evaluating the historical performance of high dividend paying stocks.

Since the Federal Reserve (Fed) brought interest rates to historic lows in 2008, investors have turned to investments other than bonds to meet their income needs. A popular source of income has been stocks that pay high dividends to investors.

The paper, titled "High Dividend Stocks in Rising Interest Rate Environments," examines the historical performance of the highest decile of dividend paying stocks from 1960 to 2014 in an attempt to better understand how these high dividend payers have performed during interest rate hikes.

In 7 of 10 rising interest rate environments since 1960, high dividend stocks outperformed the S&P 500. The three time periods seeing underperformance experienced rapid rate increases, indicating that the speed of increase matters.

Although the Fed has announced that they will raise interest rates, many economists believe these increases will be gradual, and it could take several years before interest rates return to normal levels.

"Investors are eager to understand how rising interest rates may impact their investments," said Jay Jacobs, Director of Research at Global X. "We found that the performance of high dividend stocks was strong during periods of gradual interest rate increases. Current signals from the Fed and the markets indicate that rates are expected to rise only at a tepid pace until concerns over low inflation and global growth abate."

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SOURCE Global X Management Company LLC