Over the past quarter century, investors have turned to dividend-paying stocks as lifeboats in an ocean of volatility.
However, traders are expecting that to change, and in a pretty monumental way.
Players in the swaps market — generally institutional investors exchanging contracts over expected moves in market variables — are pricing in the lowest growth in dividends since 1950, according to a Goldman Sachs analysis. The current pricing levels imply a growth rate of just 1.3 percent a year, which would be down sharply from the average 5.8 percent growth in the 65-year period.
If the expectations are correct, it would mark a major change for retail investment strategy.
"Strategically, we are partial to dividends, which have historically generated a meaningful share of total return for US equities," Goldman strategists said in a note to clients. "However, on a tactical basis, rising interest rates pose a risk to high dividend yield stocks."