Better Than Bonds

On June 9, I’ll host an exclusive live chat for Conrad’s Utility Investor subscribers. We’ll start at 2:00 p.m., and I won’t sign off until I’ve answered every question. A transcript of the event will be available the next day.

Given the recent uptick in Treasury yields and scuttlebutt about the Federal Reserve hiking interest rates, we’ll probably spend a fair amount of time discussing the best strategies for the current environment.

When you look at the historical data, the Dow Jones Utilities Average exhibits scant correlation to movements in interest rates. In fact, utility stocks have posted gains in years when interest rates have climbed and when they’ve fallen.

Nevertheless, the conventional wisdom persists that dividend-paying stocks will get walloped because rising interest rates erode the value of future dividends. This faulty logic treats stocks like bonds and overlooks the potential for dividend growth.