In 2013, hot names like Tesla (TSLA) and Netflix (NFLX) were all the rage but in the last few months that's all changed. Rapid growth businesses are falling out of favor (Tesla is down roughly 20% and Netflix is down almost 30% since the beginning of March) and replacing them are less glamorous dividend paying companies. As concerns about future economic growth escalate and interest rates continue to remain at all-time lows, investors are turning to large dividend payers for safety and income. While the S&P 500 (SPY) returned 1.7% in the first quarter of 2014, the iShares Select Dividend Index ETF (DVY) returned 3.6% in the same period.
And for income investors the current pickings are pretty slim. Money market funds and short-term Treasury bills are yielding mere basis points. According to Bankrate, the average 2 year CD is yielding just 1%. With the current annual inflation rate sitting somewhere between 1% and 1.5%, income investors are falling behind unless they lock up their money for multiple years or increase risk.
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