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Dividend Stocks with Bond-like Yields

February 07, 2012 – Comments (0) | RELATED TICKERS: PFE , WM , AEP

While some wonder if dividend investing is a fad, the strategy probably has staying power. Bonds yield little, and short-term rates are near zero, leaving individuals with few places to find yield. Demographics favor income investing; millions of baby boomers retire each year, and they want income to supplement Social Security and minimize the drawdown of retirement assets.

Opportunities are limited in the bond market, with Treasuries topping out at 3% and high-quality 30-year municipals at only 3.5% after a sharp rally in recent months. These yields are near the lows of the past 50 years. Companies with high and sustainable dividends are often valued more like bonds than stocks, partly because 4% and 5% dividend yields often are higher than the rates on many corporate bonds.

A 4% dividend seems to resonate with investors who are willing to pay premium prices for companies with high yields. Some of the strongest S&P 500 industry groups last year — utilities, consumer staples and drugs — had some of the index’s highest yields.

See the dividend stocks with bond-like yields.