Dividends4Life: Consider Dividend Stocks Instead Of Bonds

Consider Dividend Stocks Instead Of Bonds

Posted by D4L | Monday, March 25, 2013 | | 0 comments »

Frustrated with low bond yields, investors have been pouring into ETFs that focus on dividend-paying stocks. During the past year, Vanguard High Yield Dividend (VYM) recorded inflows of $2.6 billion, while iShares High Dividend Equity (HDV) attracted $975 million, according to IndexUniverse.com. The rush into dividend stocks has left many financial advisors shaking their heads. According to the conventional view, all stocks are risky, including dividend stocks. Advisors warn that in the next downturn, dividend stocks could sink along with the rest of the market. For protection, investors should hold sizable stakes of government and high-quality bonds.

Noted Princeton professor Burton Malkiel takes a different view. Malkiel is urging clients to shift from government bonds into dividend stocks and other assets. "The old saw is that government bonds are the safest investment in the world," he says. "But these days government bonds are risky." Malkiel argues that in the next decade, bonds are likely to return nothing. The problem is that interest rates are bound to rise. When that happens, bond prices tend to sink. The coming bond bear market may not start this year or next, Malkiel says.

Source: The Street

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