In anticipation of the Federal Reserve’s interest rate decision in September, more investors are turning their attention towards dividend stocks. This strategic move is being suggested by Paul Baiocchi of SS&C ALPS Advisors, who believes that the Fed will likely ease rates. Baiocchi, the chief ETF strategist, highlighted that investors are veering away from money markets and fixed income and instead redirecting their focus towards leveraged companies. These companies stand to benefit from a decreasing interest rate environment, making them an attractive investment option.
ALPS, the issuer of several dividend exchange-traded funds including OUSA and OUSM, is seeing a shift towards dividend ETFs. Both OUSA and OUSM are overweight in sectors such as health care, financials, and industrials as compared to the S&P 500. According to Baiocchi, these dividend ETFs exclude energy, real estate, and materials – sectors that are deemed unstable and volatile. The goal of OUSA and OUSM is to provide drawdown avoidance by focusing on durable dividends that have been steadily growing and are well-supported by strong fundamentals.
Mike Akins, the founding partner of ETF Action, also views OUSA and OUSM as defensive strategies due to the clean balance sheets of the stocks included in these dividend ETFs. Akins notes that the dividend category in ETFs is gaining traction in popularity, although he admits that the exact reason for this surge in interest towards dividends remains unclear. Despite not having a definitive explanation for the trend, Akins acknowledges the defensive nature of dividend stocks as a preferred choice among investors.
It is evident that investors are turning towards dividend stocks in anticipation of the Federal Reserve’s upcoming interest rate decision. The strategic shift towards dividend ETFs such as OUSA and OUSM is driven by the belief that these stocks offer stability, growth potential, and drawdown avoidance in a volatile market environment. With the popularity of dividend stocks on the rise, it seems that investors are increasingly recognizing the value and defensive nature of dividends as a sound investment strategy.