Bond yields are at all-time lows, but these dividend stocks are stable alternatives
Income in the bond market is rapidly disappearing, and
that’s a weird concept to try and wrap your head around.
For decades — centuries, even — investors around the world
have bought fixed-income instruments for relatively risk-free income. The
concept is simple. You give money to a government or corporate entity who turns
around and pays you interest for lending that money to compensate for risk and
time.
But this simple concept has been flipped on its head
recently. Specifically, the “interest” part of the above fixed-income equation
has gone out the window. Consider the following:
-The 10-year Treasury yield is around 0.6%.
-The 30-year Treasury yield has plunged to all-time lows
around 1.3%.
In other words, across the world, the income part of the
fixed-income equation is rapidly disappearing. Weird, right?
Despite this, U.S. equities are still giving investors income.
That is, the S&P 500‘s dividend yield presently hovers just below 2% —
significantly above all-time low levels (roughly 1% in 2000) and also on the
upper end of where the S&P 500 dividend yield has hovered over the past 20
years.
Big picture, then, while the fixed income market is
suffering from disappearing income, some stocks are still paying good income.
The implication? Buy stable dividend stocks that pay more
than any other relatively risk-free bond in the world will. As investors grow
tired of not even beating inflation by buying a 10-year Treasury note, they
will inevitably pile into stocks which: 1) have much higher yields, and 2) have
a history of steady and consistent dividend hikes.
Without further ado, let’s take a look at five dividend
stocks that fit this description.
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