The Treasury Department’s daily yield-curve rates shed light on investors’ fear of a recession and the likelihood that bond yields will remain very low for a long time.
The world remains awash with cash, for the simple reason that major central banks, including the Federal Reserve, created trillions of dollars in liquidity by purchasing bonds in tremendous qualities during and after the financial crisis of 2008. Central banks’ balance sheets remain bloated. And as Grant pointed out, one reason the yield curve is inverted is that the Fed doesn’t buy short-term paper.
ThomasPartners is based in Boston and has about $16 billion in assets under management. The firm’s main strategy is to select quality stocks with attractive dividend yields, while emphasizing companies’ ability and likelihood to increase dividend payments significantly over time. It is also important to consider that if you buy shares of a quality company with an attractive dividend yield, and the dividend raises steadily and significantly, then several years later, the yield on your original investment will be much higher.
Microsoft’s current dividend yield may not be particularly attractive, but “they grow the dividend at a nice rate and we think they will continue to grow it,” McMahon said. McMahon described a decision to hold Microsoft in the portfolio as “nothing particularly clever,” but also said, “we like the way the company is positioned for cloud and enterprise. They grow the dividend at a nice rate and we think they will continue to grow it.”
As the company continues to improve various operations to address regulators’ concerns, “it is a good holding in the interim,” McMahon said. He added that “too much capacity in the mortgage space” has been a challenge for the bank, but also said, “we like Wells Fargo’s diversified business model.”
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