In this low interest rate environment, income-minded investors, who have some tolerance for risk may find dividend-paying stocks attractive. In fact, nearly 40% of S&P 500 companies have dividend yields above the 10-year US Treasury bond yield.
The appeal of dividend-paying stocks is easy to understand as they can provide investors with regular income regardless of market conditions. In addition, many dividend paying companies increase their dividends over time thereby creating a growing cash flow over time versus the fixed coupons of bonds. It is important to note, however, that equities typically exhibit a higher volatility of returns than bonds, and the underlying company may choose to increase, decrease, and/or eliminate the dividend at any time. Regardless, we consider dividend paying equities an important part of a well-diversified income-generating portfolio.READ MORE