{"id":13279,"date":"2010-09-23T12:54:15","date_gmt":"2010-09-23T16:54:15","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=13279"},"modified":"2010-09-23T12:54:15","modified_gmt":"2010-09-23T16:54:15","slug":"why-you-can-do-better-than-bonds","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/09\/23\/why-you-can-do-better-than-bonds\/","title":{"rendered":"Why You Can Do Better Than Bonds"},"content":{"rendered":"

Why You Can Do Better Than Bonds<\/span><\/a><\/p>\n

By Sara Nunnally, Editor, Smart Investing Daily <\/span><\/p>\n

The U.S. 10-Year Treasury bond is a safe investment… right? For the most part, yes. The U.S. government — for all its flaws — is not likely to go bust tomorrow.<\/p>\n

But yields have been sliding for nearly 30 years, and we haven’t yet seen the bottom. At the same time, bond prices have been climbing in near bubble-like fashion. That means investors are spending more for a lower yield, all in the name of safety.<\/p>\n

Yesterday, Bloomberg reported, “Goldman Sachs Group Inc. economist Sven Jari Stehn says the Fed could buy ‘at least’ $1 trillion in Treasury notes, and ‘sizeable purchases of Treasury securities’ will begin later this year or early next year.”<\/p>\n

So yields could continue to drop<\/a> through the rest of the year, and maybe even into next year.<\/p>\n

Now, bonds play a part in any balanced investment portfolio, but if you’re looking for steady extra income, you can do better.<\/p>\n

Much better.<\/p>\n

As of midday yesterday, the yield on a 10-Year Treasury note was 2.69%. But the annual dividend yield for AT&T, Inc. (T:NYSE<\/a>)<\/strong> is 6%! That’s an extra $1.68 a share…<\/p>\n

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You could get $110,000 back for every $10,000 you invest!<\/strong><\/p>\n

Apple’s iPhone became the mega-hit that it is because of its Touch-Sensitive Screen Technology. I’ve found a brilliantly run $470 million enterprise that has practically cornered the market for Touch-Sensitive Technology.<\/p>\n

Get the astounding facts in 4 seconds…<\/a><\/strong><\/p><\/blockquote>\n<\/div>\n<\/div>\n

Unsung Portfolio Heroes<\/h3>\n

Investors looking for value in the stock market sometimes discard companies that offer regular dividends. In many cases, these investors would rather see that cash pumped back into the company.<\/p>\n

But dividend stocks, over the long term, have outperformed non-paying stocks. According to Ned Davis Research and Income Stock Report<\/a>, “dividend stocks on the S&P 500 generated a total return of 10.19% per year compared to the 4.39% generated from non-dividend stocks” over the past 30 years through November 2009.<\/p>\n

And the difference between the two has been widening over the past couple years.<\/p>\n

That could mean that in times of economic uncertainty, dividend-paying stocks are a better choice for all types of investors. When you’re looking for steady gains in the stock market, rather than the fast appreciation of a company’s share price, dividend-paying companies shine all the more.<\/p>\n

Dividends can help you determine the fundamental health of the company, because dividends are paid to investors from “leftover” earnings.<\/p>\n

A company paying regular dividends, even in a bearish market climate, is ensuring investor confidence, and lowering volatility. This is because investors tend to hold dividend-paying stocks<\/a> through bear markets, according to Bloomberg Businessweek<\/em>.<\/p>\n

So not only do dividend-paying stocks take some volatility out of your investment portfolio, but these companies pay you money for being an investor…<\/p>\n

A Peek Behind the Dividend Yield Curtain<\/h3>\n

Dividend yield is calculated by dividing the annual dividend per share by the stock’s share price. Simple enough, right? By this calculation, the higher the yield, the more attractive the dividend stock.<\/p>\n

But let’s take a closer look at this equation.<\/p>\n

Let’s assume that Company X, which is trading for $20 a share, keeps its dividend, of $1.00 annually, steady as the market turns against it. At this point, the annual dividend yield is 5%. If Company X’s share price falls to $15, the annual dividend yield becomes 6.67%.<\/p>\n

The dividend is still $1 a share… The difference is that Company X has dropped in share price. In other words, a high dividend yield isn’t the only thing you should look for in a dividend-paying company.<\/p>\n

(Do you like my breakdown on dividend stocks? Sign up for Smart Investing Daily<\/em> and let me and my fellow editor Jared Levy simplify the stock market for you with our easy-to-understand investment articles<\/a>.)<\/p>\n

Forbes<\/em> has compiled a list of the top 10 dividend-yielding stocks from the Dow Jones Industrial Average.<\/p>\n

You can find the list here<\/a>, but besides the companies listed, take a look at the other parameters Forbes<\/em> took into consideration:<\/p>\n