Now that large-company stocks are paying higher yields than bonds, investors may be lured back to equities, according to Jeremy Schwartz, director of research at WisdomTree Investments.
Ten-year Treasuries are yielding 2.7%, while the SPDR S&P 500 ETF (SPY), which tracks the S&P 500, has a yield of 3.1%. "When you have higher bond yields, there is less of a reason to go into stocks," Schwartz says. "From 1958 until 2008, the 10-year note sold at a higher yield than the market."
The WisdomTree LargeCap Dividend Fund (DLN) is currently yielding 4.6%. Its top holdings include Bank of America (BAC), Exxon Mobil (XOM), General Electric (GE) and Pfizer (PFE). "In a way, this ETF is the S&P 500 of dividend-paying stocks," Schwartz says.
Thirty-four of WisdomTree's 42 equity ETF offerings revolve around dividend-paying stocks. There is no shortage of high-yield equities to choose from, but buying baskets of stocks may be the way to go. "Given the markets' extreme volatility, I am more comfortable diversifying our clients' portfolios through the use of ETFs," said Greg Merlino, founder of Ameriway Financial Services in Voorhees, N.J. "The risk-reward tradeoff is too dicey for individual stocks right now."Merlino agrees with Schwartz that dividend investing has become more appealing. "It's become more attractive because you are being paid while waiting for the market to recover," he said. Merlino particularly likes the iShares S&P National Municipal Bond Fund (MUB) for income investors. "When you are looking at Treasuries that pay close to nothing, 3.6% is a pretty attractive yield given that it's tax-free," he said.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV