Current yield can be used to compare the interest income provided by a bond to the dividend income provided by a stock.
But right now, thanks to the Bernanke Put that is pushing bond rates to epic lows, many utilities have dividend yields higher than investment-grade bond yields.
Like the bond market of late, dividend stocks have taken on a new respect.
At one time analysts liked to do this by quoting the yield gap (though this became inverted when dividend yields fell below bond yields in the 1950s) or the yield ratio, both of which relate share to bond yields.
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In addition to diversifying holdings, most municipal bond mutual funds offer an option for dividend reinvestment, so returns can compound over time.
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Consider alternative investments for your intermediate-term goals like short-term bond funds, municipal bond funds or income funds that include dividend-paying stocks in the mix but watch for bonds with long maturities.
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Did you know that there are actually stocks with dividend yields much greater than their bond yields?
Bond ETFs pay out interest through a monthly dividend, while any capital gains are paid out through an annual dividend.
Judging the robustness of the dividend is very similar to how bond analysts evaluate the ability of a company to pay interest on its outstanding bonds.
Also, the dividend yield on Continental European companies is at an all-time high with 47% of the market capitalization of Europe offering a dividend yield above the respective government bond yield, Credit Suisse says.
Dividend yields are almost as high as bond yields (in some places they are higher), and equities also offer the prospect of income growth.
The Ave Maria fund family includes Ave Maria Catholic Values (AVEMX), as well as a growth fund (AVEGX), a dividend fund (AVEDX), a bond fund (AVEHX), and a money market fund.
They resemble bonds in that their dividend rate is typically fixed, much like a bond coupon.
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The dividend is riskier than the coupon on a long Treasury bond (which yields about the same) but is presumably better protected against inflation.
There was an exodus of income investors who were forced out of the bond market by inflated bond prices and low yields, and into the stock market mostly dividend paying stocks.
Italy's Generali cut its dividend 56% after taking large write-downs on its Greek bond portfolio and other assets.
The dividend or earnings yield, for example, can be compared with bond yields.
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For a taxpayer in the top federal bracket of 35%, a 3% dividend yield is equivalent to a 4% yield on a taxable bond.
The dividend yield from shares is historically high, compared with government-bond yields.
Like a bond, it pays a fixed income, but, like a stock, the dividend can be suspended if a company has a financial emergency.
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But even if macro concerns of excessive investor pessimism keep a lid on stock prices in the months ahead, dividend paying stocks offer respectable cash payouts that are close to as safe as bond yields.
This is done by extrapolating a company's earnings out five years, then weighing its expected earnings and dividend streams against its historical stock price volatility (reflecting risk) and the AAA bond yield (reflecting opportunity cost).
Venerable IBM, for instance, used the proceeds of a 2010 bond offering (which pays a 1% yield) to repurchase shares, which had a 2% dividend yield at the time.
Monthly dividend paying stocks can be an appropriate complement to other monthly-paying securities like closed-end bond funds.
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In combination with a 2% dividend yield, this stock offers a substantial 9% earnings yield that compares well with current bond returns.
It also pays a dividend now which at 2.4% exceeds the return you can earn on a 10 year Treasury Bond.
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