CD rates are near 5%! If they go any higher will that affect the stock market?

[MarathonMike]

Last dividend was 88-cents per share.

I have made a fortune on dividend paying stocks. They are wonderful vehicles for building wealth. CDs at 5% are great when you have cash you don't want to put into the stock market. Everything has it's purpose.

 

[Mac1958]

High CD rates affect the bond market more than the stock market.

 

[Lisa558]

Maybe. Banks are pushing them but they are only 3.5% for 13 months and 3.25% for 6 months in my area

My area is offering 5% for 11 months….from a National bank, and available online. Just do a search.

 

[otto105]

I have made a fortune on dividend paying stocks. They are wonderful vehicles for building wealth. CDs at 5% are great when you have cash you don't want to put into the stock market. Everything has it's purpose.

If I hold 1,200 shares of NLY for a year what is your dividend payout?

Hint, it's not 5%.

 

[DudleySmith]

lol what's bad about 4%-5% interest rates on savings? Oh yeah, it means no more free money for companies buying back their own stocks, etc., less gambling on vastly overpriced watered stock,

Wah.

 

[Harpy Eagle]

If I hold 1,200 shares of NLY for a year what is your dividend payout?

Hint, it's not 5%.

The dividend for 2022 was just a tad over 4%.

.88 on a share value of 21.85

During that same time the shares lost more than 10 dollars in value per share.

 

[JohnDB]

Investing by borrowing money is a norm these days. Using the cash in your portfolio as a security for the purchases.

Because if the projected return is 25% and the cost is maybe 2%....then it's a no-brainer to borrow the money. (Even when calculating risk % into the equation which is a necessity)

However....as interest rates rise, borrowed money comes out of the stock market. Because between the costs and increased risk % there is no longer a margin of profit. In fact it costs money to own stocks.

Now traditionally when margin rates for the entire market exceed 55%. (Meaning that over 55% of the value of stocks in the market is from money that is borrowed) there is an expected crash coming and its time to sell everything including the farm.

So....rates are rising. In times past CDs and bonds have risen very high....12% or better. And the Market had lackluster performance at best. Foreign markets were worse with inflation and unstable marketplaces.

However, holding bonds that pay 12% when market rates drop to 9% is great....you make bank on those deals. (Bond markets make money in falling rates and lose in rising rates)

So....
Just understand that 80% of the individual investors will buy exactly the wrong stocks and bonds for the wrong reasons. Because the BIG money owns the media outlets. You won't get good information from any media outlet. They get their marching orders and publish what they are told. Glamor stocks are a very difficult market to play in and usually make a small fortune out of a big one.

 

[otto105]

The dividend for 2022 was just a tad over 4%.

.88 on a share value of 21.85

During that same time the shares lost more than 10 dollars in value per share.

Sure...

NLY Dividend Yield 2023 & History (Annaly Capital Management)

 

[WorldWatcher]

Here are the rates as of today at my credit union.

Most of our savings go into our 401K, but we keep so more liquid assets in a few CD's at differing rates of maturity as a "rainy day/house maintenance" funds.

WW

 

[Harpy Eagle]

Sure...

NLY Dividend Yield 2023 & History (Annaly Capital Management)

You are correct, the .88 was just for the last quarter. For the full year they got .22, .22, .88 and .88 which is 2.20 a share for the year. At the same time their shares lost more than 10 dollars a share.

It is a fine tool if you know you will not need the money for a long time. But it serves a very different purpose than CD

 

[MarathonMike]

If I hold 1,200 shares of NLY for a year what is your dividend payout?

Hint, it's not 5%.

Do you really believe I don't understand how stock dividend payouts work after my numerous posts on the subject?

 

[otto105]

Do you really believe I don't understand how stock dividend payouts work after my numerous posts on the subject?

You seem not too.

 

[HaShev]

Today you saw the affects of rising rates, not just fixed income stocks, but explicitely Bank Stocks. Why?
Well these so called experts are missing the major catalyst- lower divy payouts from bank stocks & preferreds than the CD and treasury notes, why would someone hold the riskier asset predicted to give back it's wild gains, when they have less risk higher fixed income from a CD? That's also why you should not be in lower divy exchange traded funds & stocks & other sector preferreds. If people expect a 10-20% downturn or a flat market then why stay in something with lower rates? Hence Banks having the lower end divy % will sell off especially when the stocks had a nice run the last few years. This means low divy high rated companies also sell off at rising CD rates as does their preferreds.

 

[Flopper]

If I hold 1,200 shares of NLY for a year what is your dividend payout?

Hint, it's not 5%.

The higher the dividend or interest the higher the risk. A 17% dividend is not likely to last with rising interests, slowing sales in real estates and a economic slow down likely. And when the dividend is cut the stock price will fall so you end up with a capital lose in addition less dividend income.

 

[Flopper]

View attachment 763645

Here are the rates as of today at my credit union.

Most of our savings go into our 401K, but we keep so more liquid assets in a few CD's at differing rates of maturity as a "rainy day/house maintenance" funds.

WW

These are current CD Rates as March 9th: The minimum purchase is $1,000. The increase in yield about 2 years is so small it doesn't make much sense. Buyers have to be aware that there are a number of different types of CD accounts offered by various institutions. Some offer bump up option others offer no penalty early withdrawals, and varying rates dependent on the type customer you are. I prefer straight CDs with no bells and whistles which generally have higher yields.​

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Current CD rates available through Schwab CD OneSource​

See below for a selection of today's rates
Current CD rates available through Schwab CD OneSource

Maturity Ranges	Rates up to
1-3 Month CDs	5.09% APY
4-6 Month CDs	5.16% APY
7-9 Month CDs	5.23% APY
10-18 Month CDs	5.35% APY