BOSTON ( TheStreet) -- According to Benjamin Graham's margin of safety principal -- a measure of relative value between stocks and bonds -- buying an S&P 500 index fund poses less risk than purchasing long-term U.S. debt.
However, the dividend yield of the S&P 500 -- at 2.09% -- is scraping against all-time lows.
This puts income investors in a bind: Bonds with a strong credit rating don't yield much, exposing investors to a substantial amount of interest-rate risk on the 10- and 30-year end of the curve.
Stocks -- when purchased through an index fund -- offer an
earnings yield far in excess of U.S. Treasury bonds
, but don't offer much in terms of absolute yield. That's acceptable for those seeking long-term appreciation, but troublesome for those in need of income.
One strategy that income-focused investors should consider is allocating their portfolios toward a blend of U.S. fixed income and carefully chosen dividend stocks.
Even though U.S. bond yields are low, if the country becomes tangled in a Japan-like quagmire, already-low yields could drop further. This scenario could offer capital appreciation opportunities and (at least some) recession protection.
Regarding stocks, there are several high-yield opportunities that -- with diversification -- offer reasonable opportunities for income, capital appreciation and safety.
on the following pages have been screened for the following criteria:
- Each stock yields more than a 30-year Treasury bond.
- TheStreet Ratings recommends each stock as a "buy."
As always, stock ratings should not be treated as gospel -- rather, use them as a starting point for your own research.
The stocks on the following pages are ranked by their dividend yield, in ascending order.