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Historically low-interest rates have made it difficult over the last decade for income-oriented investors that want to generate safe cash flow for their retirements, but you already know this.

Dividend-paying stocks have become more appealing to income investors because of their competitive yields, the favorite tax treatment that dividends receive, and their ability to grow their payouts over time. While fixed interest rates from bond investments will lose purchasing power to inflation over time, the purchasing power of income from dividend growth stocks is more protected because companies tend to raise their dividend payments every year.

We have put together a list of ten companies that offer strong yields (above 4%), have consistent cash flow, and a strong track record of dividend growth. They have raised their dividend for at least ten consecutive years and have low payout ratios (below 75%), meaning that they will have the ability to continue to pay their dividend if their earnings have a temporary dip.

Stock prices will always fluctuate, but the dividends paid by these rock-solid dividend payers should remain secure with only moderate earnings growth over time.

View Our List of 10 "Rock Solid" Dividend Stocks Here

William Bushee
MarketBeat

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How Interest Rates Are Controlled: An Overview

Interest rates, the cost of borrowing money, are a fundamental economic variable that impacts everything from consumer loans and mortgages to investment and spending habits. Central banks, like the Federal Reserve in the United States, the European Central Bank in the Eurozone, and the Bank of England in the United Kingdom, are primarily responsible for controlling interest rates to achieve various economic objectives. Here's a simplified explanation of how this process works:

1. Setting Policy Rates:

   • Central banks set a target for the short-term interest rate at which banks can lend to one another overnight. In the U.S., this is known as the Federal Funds Rate. This target rate indirectly influences interest rates throughout the economy.

2. Open Market Operations:

   • To achieve the target rate, central banks engage in open market operations, buying or selling government securities such as Treasury bonds. When a central bank buys securities, it injects money into the banking system, lowering interest rates. Conversely, selling securities removes money from the system, raising rates.

3. Discount Rate:

   • The discount rate is another tool at the central bank's disposal. This is the rate at which commercial banks can borrow directly from the central bank. A lower discount rate can encourage banks to lend more, reducing interest rates, while a higher rate has the opposite effect.

4. Reserve Requirements:

   • Central banks may also adjust the reserve requirements, which are the minimum amounts that banks must hold in reserve against their liabilities. Lowering reserve requirements frees up more money for lending, which can reduce interest rates. Raising them has the opposite effect.

5. Forward Guidance:

   • Beyond actual rate changes and operations, central banks also use communication as a tool to shape expectations about future policy. This "forward guidance" can influence long-term interest rates and economic behavior even without immediate changes to the policy rate.

Controlling interest rates is a complex balancing act that involves gauging economic indicators like inflation, employment, and consumer spending. The central bank's actions are closely monitored and interpreted by financial markets, as they have far-reaching implications on the economy, affecting everything from home loans to the stock market and the value of the currency.

 

 
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