Published Fri, 01 Jun 2018 15:47:14 -0400 on Seeking Alpha
For many, the year 2018 has turned out to be tumultuous. But, perhaps, what is most encouraging is the fact this latest earnings season was impressive. To be sure, not all sectors performed equally - and some sectors certainly look more impressive than others. For these reasons, dividend investors must be looking for ways to focus on the industry sectors with the best potential to outperform throughout the summer months.
In our view, the banking sector is set to benefit from a rising interest rate environment in unique ways as a rising interest rate environment will make it much easier for the biggest names in the industry to expand on margins. This is not something that can be said for most of the market, as tighter monetary conditions generally erode the outlook for profitability. Dividend investors looking to build exposure should be watching this area of the market as a primary strategy for capital appreciation in addition to elevated yields. To express this view, we are long the SPDR Financial Select Sector Fund (NYSEARCA: XLF) as it offers diversified exposure to some of the best names in what should be an accelerating industry segment going forward.
Stock Price Chart: CNN Money
The incredible stock rally of the last five years has benefited those holding long positions in the SPDR Financial Select Sector Fund XLF. But those moves have not carried over into this year, as XLF is trading lower by 2.62% on a YTD basis.
XLF Holdings:... Read more
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