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Retirement Strategy: Blue Skies For Dividend Growth Investors, More Storms Ahead For Savers

Published Thu, 23 Jul 2020 09:00:00 -0400 on Seeking Alpha

Seeking AlphaDividend StrategyRetirement Strategy: Blue Skies For Dividend Growth Investors, More Storms Ahead For SaversJul. 23, 2020 9:00 AM ET|| Includes: JNJ, KO, MO, Oby: Regarded SolutionsRegarded Solutions Portfolio strategySummaryThe Federal Reserve has given another clear signal that there is less risk for investors, especially in long term.
While the value of the dollar is eroded by inflation, so is debt, which is a positive for companies who borrow.
Dividend growth investors could have a unique opportunity to obtain very attractive yields from Aristocrats and Kings given a further reduced risk environment related to inflation.
I am not sure if everyone is aware of what the Fed has recently stated when it comes to their 2% inflation target before taking steps to raise interest rates. Basically, the 2% is now off the table, and while I am not sure what a new target number might be, this decision could have positive on regular people as well as corporations.
Here is what Bloomberg's Tim Duy has opined:
For the Federal Reserve, this time really is different. Having learned a hard lesson in the last recovery — don’t tighten monetary policy too early — the central bank is leaning in the opposite direction. In practice, that means the Fed will not just emphasize actual inflation over forecasted inflation, but will also attempt to push the inflate rate above its 2% target. It’s a whole new ballgame... The Fed’s traditional Phillips curve approach to forecasting inflation, which relies on the theory that inflation accelerates as unemployment falls, was widely criticized during the most recent economic recovery.
The Phillips curve has been used by the Fed to establish the 2% inflation target for years, however, with the shift in their stance, it appears to me that the market now has even less risk for longer-term investors!
...Think about what [Fed Governor Lael Brainard] is saying. Traditionally, the Fed attempts to reach the inflation... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
ALTRIA GROUP 44.46   13.2 3.36 3.36 7.23
REALTY INCOME 74.49   56.9 1.31 2.72 3.69
COCA-COLA 55.11   33.6 1.64 1.60 2.94
JOHNSON & JOHNSON 130.43   21.6 6.03 3.80 2.93


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