Dividends4Life: You Shouldn't Rely on These Dividend Stocks

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You Shouldn't Rely on These Dividend Stocks

Posted by D4L | Thursday, April 12, 2012 | | 0 comments »

Investors are facing one of the toughest challenges they've ever had to deal with. With interest rates at rock-bottom levels, it's really hard to generate the income that many people need in order to make ends meet. As a solution, many investors have decided to embrace dividend-paying stocks in lieu of bonds and other fixed-income investments. In a booming stock market, that's been a winning bet. But in the process, retirees and other conservative investors are adding to their risk levels -- and eventually, those bets could come crashing down on them, creating what could become a new financial crisis.

Investors need steady, reliable income in order to plan their finances. The benefit of bonds is that no matter how much or how little they pay, you know in advance exactly how much you're going to receive and when you're going to get it. Barring a cataclysmic event like a default, a bond's payouts are reliable and dependable. By contrast, dividends from stocks are inherently unpredictable. Although that lack of predictability sometimes results in positive surprises when dividends increase, companies have no legal obligation to keep paying dividends at all, leaving the door open to dividend cuts at any time.

Source: Motley Fool

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