One of the most important lessons I’ve learned in my years as an active market participant and a portfolio manager is to never let yield drive the construction of one’s investment portfolio.
That said, falling interest rates have created a real challenge for those living off of the income generated from their retirement savings, leaving many with little choice but to onboard excessive risk into their portfolios. This includes shifting entirely to dividend stocks or, worse, private and illiquid mortgage pools.
Unfortunately, the outlook for yield-hungry investors isn’t a favorable one, with interest rates expected to continue to remain at or below record lows while dividend cuts are only just getting started.
According to Howard Silverblatt, a senior index analyst for S&P Dow Jones Indices, 16 companies in the S&P 500 have cut their dividends so far, with 31 suspensions since mid-March. Among the notable suspensions are Boeing, Delta Air