The dividend room continues to get more crowded – but it is still the place to be. Since 1960, the monthly dividend yield on the S&P 500 has averaged 3.1% against a 10-year Treasury bond yield of 6.6% during the same period. Monthly income from bonds was almost twice what the S&P 500 paid investors from dividends alone. Of course, stocks also generated capital gains for most of the post-1960 holding periods so total returns were much higher than dividend yield alone.

There is certainly a place in portfolios for blue-chip, low-leverage consumer oriented names like McDonalds, Philip Morris, and Procter & Gamble which are the staples of the mutual fund-oriented dividend funds. But for investors looking to diversify their portfolios into some segments of the stock market that are usually not as well-traveled, there are some niche sectors which offer the added allure of monthly dividend paying stocks. Some of these sectors do well in a slow-growth environment (mortgage REITs), others need a stable or growing economy (business development companies), and others do best with strong global growth (energy). A mix of these sectors gives you ‘barbell’ protection while paying you in the interim while we wait to see what happens to the U.S. economy, European debt issues, and China engineering a soft landing.

Source: Forbes

Related Articles:
- Increasing Dividend Yield Part V: MLPs
- Increasing Dividend Yield Part IV: Bonds
- Increasing Dividend Yield Part III: Preferred Stock
- Increasing Dividend Yield Part II: REITs
- 11 Dividend Stocks Providing Positive Feedback

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