Dividends4Life: Dividend stocks surpassing bonds yield

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Dividend stocks surpassing bonds yield

Posted by D4L | Friday, October 01, 2010 | | 0 comments »

Some top-rated U.S. companies have turned traditional corporate finance practice on its head, and are now offering greater yields on their stocks than on their bonds. The trend could signal a buying opportunity in stocks. Income investors, in particular, can now reap a higher yield by buying some blue-chip shares than by investing in bonds of the same companies – a reversal of the norm that has held for decades.

Dividend yields and bond yields aren’t exact equivalents, because equity investors run the risk that share prices will fall. But if prices for J&J and Microsoft shares do nothing more than remain stable over the next few years, shareholders will do better than bondholders. Investors are shying away from equities because of uncertainty over the economic recovery. At the same time, record low interest rates are luring corporations into the debt market, even if, like cash-rich Microsoft, they have no immediate need for money.

Source: Globe and Mail

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