The Federal Reserve’s first interest rate hike in three years changes the dividend income strategy for retirees. In the last few months, several sectors performed poorly in anticipation of the 25-bps increase.
Utilities performed poorly since peaking in late April. NextEra Energy (NEE) peaked at around $98 to close at $80.47 last week. After the US 10-year Treasury bill yielded 5.0%, NextEra’s 3% dividend yield is not enough. Another utility stock on a downtrend is Southern Company (SO). The stock fell from $98 in July to close below $86.
Telecom stocks face substantial selling pressure. T-Mobile (TMUS) is hovering near a 52-week low. Similarly, in Canada, TELUS (TU) traded at a 52-week low while both BCE (BCE) and Rogers Communications (RCI) pulled back.
Verizon Communications (VZ), however, broke out to trade near a 52-week high in mid-September.
Financial services firms are pulling back. JPMorgan Chase (JPM) and Morgan Stanley (MS) dropped in the last few weeks. Higher interest rates slow the economy. That would hurt business transaction volumes. Fortunately, the upcoming Anthropic IPO should give underwriters some extra fee income.
