One advantage that stock dividends have over bond yields is that dividends generally rise over time as companies prosper. The dividend payment typically goes up, particularly at large, well-run companies. On the other hand, bond issuers never get together and decide to increase the yield on fixed rate instruments such Treasury or corporate or municipal bonds. One disadvantage of course is that stocks are far more volatile than short-term bond funds. So, if you go this route, you have to be ready for the downside risk.
In my view, with reasonable price - earnings ratios and decent dividends, selected high quality stocks look to be attractively-priced for patient, long-term investors. By high quality, I mean name brand companies with solid businesses, strong balance sheets, broad product lines and good dividend histories.
Source: MarketWatch.com
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