1st Quarter Sector Review: It’s Tough Out There For A Dividend Stock

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The first quarter was a roller coaster.&a;nbsp; It was also, as Winston Churchill once said about Russia,&a;nbsp;&q;a&a;nbsp;riddle,&a;nbsp;wrapped&a;nbsp;in a mystery, inside an&a;nbsp;enigma.&q;&a;nbsp; The table below shows returns for several S&a;amp;P sectors for the first quarter of 2018.&a;nbsp; I have sorted them in descending order of dividend yield, such that the highest-yielding sectors are first.&a;nbsp; As you can see, the high-yield sectors performed the worst.&a;nbsp; Tech and Consumer Discretionary stocks gained, and the rest of the sectors fell.

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As we know, the first quarter was characterized by a furious rally in January, a sharp pullback, a &q;bounce&q; and a resumption of the decline.&a;nbsp; So, looking at the full 3 months as a snapshot is not as instructive as a longer period of time might be.&a;nbsp; For that, there is the 1-year return column, which only strengthens the theme that for investors seeking yield in the traditional stock sectors, the tide was against you the past 12 months.

Here is the key for the 2nd quarter and beyond: is this a war on dividend stocks, in response to a fear of rising interest rates (in which investors often treat yield stocks like bonds, instead of continuing to view them as businesses)? Or is this a case where the yield stocks are simply leading the lower-yield stocks down, and the past 2 months were the first chapter of that story?&a;nbsp; I don&s;t know, and you don&s;t either.&a;nbsp; But if you have been reading my articles on Forbes.com for the past year, you know that investing for income requires a different approach from in the past.&a;nbsp; It doesn&s;t mean that we avoid income stocks, but we do have to go beyond the concept of buying them on reputation or because they are part of some sexy-sounding ETF or index.

Let&s;s see where the second quarter takes us.

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