The U.S. Federal Reserve just concluded its two-day monetary policy meeting a short while ago. As expected, the Fed kept benchmark interest rates unchanged. The Fed still expects two rate hikes for 2016, however, historically, the central bank has never raised rates close to an election. With the U.S. election coming up in November, the Fed is not likely to hike interest rates more than once this year.
Interest rates in the U.S. remain near zero. Treasury yields are also at low levels. In Europe, yields on German government bonds turned negative for the first time ever. Several central banks are also following negative interest policy. Given the environment, yield hungry investors are likely to turn to dividend stocks. Canadian investors should consider the Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX: VDY) to capitalize on this opportunity.
VDY currently offers a yield of 4.05%, which is very attractive considering that benchmark interest rates in Canada are low and the Bank of Canada is likely to announce further cuts. In fact, some analysts say that the Bank of Canada could even consider negative interest rates at some point. Year-to-date, VDY has gained more than 5%.
