Dividends Stocks Beating Bond Yields

Fixed-income investors may find it hard to justify holding corporate bonds when dividend yields of the same companies offer a higher rate of return for at least the next five years. Corporate bond yields have fallen to the lowest levels in more than a generation. According to monthly information collected by the Federal Reserve dating to 1919, AAA corporate bonds fell to 4.72% in July, the lowest since December 1965. The high was in September 1981, when the rate was 15.49%.

Keith Goddard, president of Capital Advisors Growth Fund(CIAOX), says his clients are looking for an alternative investment strategy as bonds that used to pay a 4% yield are down to 1.5%. He recommends investors with 40% of their portfolio in bonds move to 30% and put the difference in high-dividend-yielding stocks. If an investor is willing to own a bond for five years, he should weigh the pros and cons of a basket of high-quality stocks that may deliver an attractive dividend yield.

Source: TheStreet.Com

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