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Stock Investors Race to Dividend Shares

David Becker
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The recent selloff in stocks has been accompanied by a huge move into dividend paying shares as one of the greatest sector rotations of the past 2-years continues. Investors are piling out of high flying growth stocks such as bio-techs and social media stocks and moving into heavy dividend paying stocks to cushion the blow of a market correction. Bio-techs have declined nearly 20% since hitting their peak in late February, which is considered a bear market correction.

The DVY (ishares dividend select ETF) has seen a strong performance relative to the S&P 500 index in April. So far dividend stocks have increased nearly 5% relative to the broader market benchmark. Momentum on the spread between the DVY and the SPY (DVY / SPY) is strong as the MACD (moving average convergence divergence) index on the spread has generated a buy signal.

This occur when the differential between the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The MACD moved from negative to positive territory which confirmed the buy signal. The spread has reached its highest levels since May of 2013.

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