Dividend-paying stocks may be the best option for investors looking for income, Jason Brady, managing director and portfolio manager of Thornburg’s limited-term income and U.S. government strategies funds, said at the annual spring forum of the Financial Planning Association’s New York chapter last week. “Stocks are like Ponzi schemes unless they’re paying cash—you’ve got to get someone to buy from you at a higher price,” he said.
Instead, he recommended that investors turn their attention to the yields available from equities. While derided as a waste of money companies could be using to reinvest in growth during the dotcom boom, the opposite is actually true. “You’d think companies that don’t pay dividends would do better because they’re reinvesting the money, but they screw it up,” Brady said, whereas companies that have to pay out a chunk of their earnings to shareholders are more judicious about where they spend what’s left.
Source: On Wall Street
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