Are Dividend Stocks a Good Bet?

The toughest problem retirees face in today’s financial markets is how to get a decent yield on our savings. In the old days we could put money in the bank, draw 5 percent interest, and live off the proceeds. Not anymore. Interest rates have actually gone up a little in the past year. But still, a 5-year Treasury bill pays only 1.6 percent interest. A 5-year bank CD offers less than 2 percent. An intermediate-term corporate bond or bond mutual fund might yield 3 percent, but bonds leave you helpless against inflation.

Other investments can provide better paybacks, but there's always a tradeoff. Master Limited Partnerships, for example, can cast off high yields, but they subject you to a complex tax situation. An annuity can also pay more, but generally does not protect against inflation. So what about high-dividend stocks? This is not a new idea, and many of the shares have already been bid up by investors, perhaps limiting future returns. But several areas of the market still offer relatively stable stocks with inflation-beating dividends.

Source: U.S. News and World Report

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