November 14, 2016
Exploring income-producing investments
The slow pace of economic growth in the United States and around the world has led to low interest rates — and in some cases, negative rates — leaving investors searching for yield. With global economic growth expected to remain subdued for the foreseeable future, interest rates seem destined to stay lower for longer, possibly forcing investors to explore substitute income-oriented investments, such as dividend-paying equities. Sector, industry, dividend yield, growth levels, payout ratios and balance sheet strength are among the factors suggesting that not all dividend-paying companies are treated equally.
“The thirst for yield is pervasive throughout the investment community — with private and institutional investors alike searching for income-generating investments,” says Terry Sandven, Chief Equity Strategist at U.S. Bank Wealth Management. “The good news is that there are attractive alternatives available for investors — depending on their income needs, time horizons and risk tolerances.”
Navigating a Low-Yield Climate
One notable change in the markets is the unusual bond environment, with historically low bond yields. Investors may want to consider a variety of investments to enhance their income, including looking for higher yields in longer maturity high-quality bonds, or even accepting higher credit risk to increase incomes. Rob Haworth, Senior Investment Strategist at U.S. Bank Wealth Management, believes there is potential opportunity to create a greater level of income by incorporating higher-yield bonds into a diversified portfolio.