Investing Topics: Interest Rates

An unsettled market has  rewarded patient investors who kept some powder dry with a number of buying opportunities. Opportunity No. 1: International Intrigue: A strengthening US economy and the Federal Reserve’s push to rein in six years of easy money have boosted the greenback’s value relative to foreign currencies, placing many of our favorite international stocks on the bargain counter. Snap them up now. Opportunity No. 2: Irrational Fear of Rising Interest Rates: The prospect of a stingier Fed has also raised concerns that US interest rates will head significantly higher, undermining returns posted by dividend-paying stocks. I tackle this myth head on and highlight several high-quality telecoms, water companies and electric utilities that have pulled back to favorable price points. Opportunity No. 3: Oil’s Retrenchment: Oil prices have also plummeted of late, fueled by surging US production and elevated refinery outages. This pullback has panicked weaker hands, giving savvy investors an opportunity to buy rock-steady integrated oil companies and first-rate pipeline owners. Opportunity No. 4: Politics as Usual: Uncertainty related to upcoming US elections has likewise unsettled the market and contributed to the market’s recent weakness. We’ll have a full review in the November issue.

The seller's market for bonds favors dividend-paying equities, but investors need to remain disciplined and avoid overpaying for quality.

Dividend-paying stocks aren’t bond substitutes and never will be. Any investor who has sold these equities because of rising interest rates has lost big over the past 22 years. Those who do so now are playing with the same fire and, inevitably, will be badly burned.

Rising interest rates don't necessarily sound the death knell for dividend-paying stocks.

Janet Yellen acknowledged that the Fed might start to raise interest rates six months after phasing out its bond-buying program toward the end of 2014. Take advantage of the selloff in dividend-paying stocks to add high-quality names.

Fourth quarter and full-year earnings normally dominate the news this time of year. And rightly so: They’re what ultimately shape shareholder returns.

The Dow Jones Utility Average has lost ground in 17 of the 30 Januarys since 1984. Happily, only 5 of those declines led to a losing year. And in 13 winning Januarys, the average total return was 24.8 percent—the only losing year 1987.

The Conrad’s Utility Investor Portfolios officially launched on July 31, 2013. Since that time, the Dow Jones Utility Average is off -2.3 percent, including dividends paid.

My Aggressive Income Portfolio is up by 9.3 percent, while the Conservative Income Portfolio has returned 3.3 percent.

US electric utilities have enthusiastically embraced renewable energy the past few years. That includes companies that have traditionally relied heavily on fossil fuels and nuclear energy.

By any measure, 2013 was a great year to own stocks. It was also an exceptionally bad time to bet against the United States of America. And that remains the case as we open the page on 2014.