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Strategies & Market Trends : Dividend investing for retirement

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To: Jacob Snyder who wrote (33621)	7/6/2021 7:37:22 PM
From: Jacob Snyder	Read Replies (1) of 34328

XLU entry point reconsidered: I had said, one of my assumptions was a continuation of the LT 11%/y total return. But…interest rates have been declining the entire time this ETF has existed. With 10y treasury yield at 1.5%, and XLU yielding 3%, investors are demanding a 1.5% premium over “safe” Treasuries. If 10y Treasury yield increases to 3%, and investors demand the same premium, then XLU must yield 3% + 1.5% = 4.5%. 10y treasury yield was 1.6%-3.0%, 2012-2019, so 3% is very possible, once QE ends. Other things being equal, 2.00 div/0.045 yield = 44$ XLU price. 64$ today. I could be wrong. Maybe regulators permit rate increases, when interest rates go up. Maybe investors do not demand as much premium over Treasuries. Maybe interest rates stay low LT. Maybe.

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