An investment approach that focuses on a singular methodology without consideration for other factors could have unintended consequences. In the case of seeking to invest in high dividend yielding stocks, focusing solely on the highest dividend number may introduce unwanted sector bias and interest rate sensitivity in a portfolio.

As domestic equity markets continue to provide U.S. investors with satisfying returns, it isn’t surprising that their investment portfolios do not have a lot of exposure in perceived “riskier” international equities. However, this can mean missing an entire critical universe of international exposure that could, at times, add potential outperformance in a portfolio, in addition to adding a diversified return stream.

The dynamic of investor demand for higher yields found in equities can be one explanation for the price trends of high dividend stocks in 2016. A potentially stronger growth and rising rate environment may reduce the relative attractiveness of high dividend stocks to investors and in turn, may spur the search for new demand-driven outperformance.

Although the Dow Jones Industrial Average is now at an all-time high, other indicators suggest proceeding with caution.