New Mantra: Low Rates for Longer
Chalk one up for Mr. B. He confounded nearly everyone, postponing policy change after months of suggesting otherwise. Only BofA economist Ethan Harris correctly predicted the chairman would taper his taper talk... a bold prediction he shared with us on July 30 during our Street Smart show.
"Low rates for longer" is the new mantra and traders wasted no time repositioning in search of yield. Corporate bonds and the dividend ETF DVY both rallied 1.5 percent on the day, surpassing the 1.2 percent gain for the S&P 500. A group of Master Limited Partnerships we follow (last discussed on 8/7/13) provide steady dividends and rallied 1.8 percent. Real Estate Investment Trusts (REITs) and utilities carried the day among the yield-oriented groups, both up about 3 percent.
There are 128 REITs traded here in the US. Since Fed "inaction" impacts the sector across the board, we're taking our cue from David Kotok of Cumberland Advisors (www.cumber.com) and focusing on Exchange Traded Funds rather than individual companies. We highlight five REIT ETFs today, noting their respective dividend yields and dividend growth rates.
As a a bonus for blog readers who prefer infrastructure to real estate, we note three MLPs both yielding and growing at least 5 percent: Alerian MLP (AMLP), Global X MLP (MLPA); JPM Alerian MLP Index ETN (AMJ), which is a curious cross-breed.