According to Benjamin Graham's margin of safety principal -- a measure of relative value between stocks and bonds -- buying an S&P 500 index fund poses less risk than purchasing long-term U.S. debt. However, the dividend yield of the S&P 500 -- at 2.09% -- is scraping against all-time lows. This puts income investors in a bind: Bonds with a strong credit rating don't yield much, exposing investors to a substantial amount of interest rate risk on the 10-30-year end of the curve.
One strategy that income-focused investors should consider is allocating their portfolios toward a blend of U.S. fixed income and carefully chosen dividend stocks. Regarding stocks, there are several high-yield opportunities that -- with diversification -- offer reasonable opportunities for income, capital appreciation and safety.
Source: The Street
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