These are extraordinary times in terms of long-term bond yields. On the one hand, investors are skeptical about stock market returns after a poor showing during the past decade. On the other hand, bond yields are so low that it does not feel right to invest in long-term bonds. Currently, the 10-year bonds yield a measly 2.4% and real yields are below 1%. A ballooning US budget deficit and the threat of inflation keep several investors away from bonds. Some of these investors instead head to the stock market and invest in high dividend stocks. Is this a good strategy? Can high dividend stocks beat 10-year bonds or the stock market?
During the 13 years between 1938 and 1950, when 10-year interest rates were below 2.5%, high dividend stocks returned an average of 18.1% (including dividends) whereas value-weighted market returns (including dividends) were only 12.7%. High dividend stocks not only managed to outperform the market by 5.4 percentage points per year, they had higher returns in 11 of the 13 years. The worst annual return of high dividend stocks was -6.7% vs. -11.2% for the market. High dividend stocks provided protection when the market was down. They beat the stock market in all down years. They also beat the stock market every time the stock market increased by more than 20%. If the stocks repeat the same pattern in the following years, investors chasing high dividend large cap companies will manage to beat both the bond and stock markets by a large margin.
Source: Business Insider
Related Articles:
Do High-Dividend Stocks Actually Outperform?
Posted by D4L | Tuesday, October 19, 2010 | ArticleLinks | 0 comments »________________________________________________________________
Subscribe to:
Post Comments (Atom)
~
Popular Posts Last 30 Days
-
If you're worried about inflation rearing its ugly head next year, you should probably worry about more likely catastrophes, such as bei...
-
As a relatively new blogger, the one thing that has stood out in my mind is the number of Canadian bloggers in the areas that I am most inte...
-
When a company pays a dividend, it's a good thing for shareholders. When a company consistently pays a dividend every quarter, it's ...
-
If you've been holding back from investing in your future just because you don't have a lot of extra cash to spare, I've got gre...
-
If you are looking for high-yield dividend stocks that can beat the market, you might want to check out these three companies. They all have...
-
If you are here to build a portfolio that thrives in all seasons, consider dividend stocks. They can generate steady returns and provide sta...
-
My top financial goal is to eventually become financially independent. The foundation of my strategy is to make investments that produce an ...
-
One way to achieve financial freedom is to create passive income, or income that does not depend on your active involvement beyond a certain...
-
The company's remarkable consistency and low-risk business model make it a "first-choice investment opportunity," according to...
-
Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciations have contribut...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.