As 2011 begins, the growing legion of investor's seeking retirement income, are faced with the same conundrum they faced in 2010. Interest rates remain at near all-time lows which severely limit attractive investment options to meet their income needs. After being traumatized by the great recession of 2008, safety and risk aversion are of the highest priority. But alas, fixed income instruments (bonds, CDs, etc.) the traditionally safest investment vehicles offer scant yields and therefore abnormally high risk profiles at today's rates.
In contrast, the situation for high-quality dividend paying common stocks has rarely been as attractive as it is today. Current valuations of many best-of-breed, blue-chip large-cap stalwarts are historically low. With valuations abnormally low, the current entry-level dividend yields for many of these high-quality companies is higher than would normally be expected. Sensible investors can put together a diversified portfolio of these blue chips with beginning dividend yields approaching what they could earn from a 10 year treasury bond. Better yet, these portfolios can be expected to increase their dividend yield every year as they historically have.
Source: iStockAnalyst
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