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By Josh Peters, CFA and Jeremy Glaser | 01-20-2016 12:00 AM

Dividend-Seekers: It's Not Your Time Yet

Now that everyone wants to own them, most defensive dividend-payers are no longer cheap, says Morningstar's Josh Peters.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser.

The start of 2016 has been a tumultuous one for stocks. I'm here with Josh Peters, the editor of our DividendInvestor newsletter and also our director of equity-income strategy, to see if it's opening up any opportunities in dividend-payers.

Josh thanks for joining me.

Josh Peters: Good to be here, Jeremy.

Glaser: The beginning of 2016 has been anything but calm. When you look at some of the dividend-paying sectors, have they also been hit by the volatility we've seen in the broad market?

Peters: Energy has been; that continues to be an area of some big dividend yields from the big oil companies, and especially the midstream energy names--MLPs and whatnot. They're off to a dreadful start, with tremendous volatility, the price of oil going up and down, flying around like it is.

For the most part, the rest of the high-yield universe has held up pretty well, which is really what you'd expect in a downturn. Your staples--utilities, REITs--defensive cash flow streams, less susceptibility to being pinched by a recession, if we turn out to have one. Currency is still an issue, certainly for the staples names, but these really dependable names have held up about as well as you'd expect.

The drawback is that they are not cheap at this point, and that's different than the downturn we had, the pullback we had, back in the late summer. You saw utilities actually get pretty cheap for a couple of weeks, and the same thing with REITs; it was good opportunity to add to those positions. The market may have come back even lower now in this latest pullback than it was in September, but these defensive groups, now when everybody wants to own them, they've actually gotten more expensive.

Glaser: Does that mean there aren't a lot of opportunities for the types of stocks you'd like to own.

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