Dicker: Many Happy Returns?

NEW YORK (TheStreet) -- A recent debate between Wharton Professor Jeremy Siegel and Pimco founder Bill Gross has called into question the "historic" outperformance of stocks compared to every other asset class, and the ability of stocks to keep outperforming in the next decade.

Gross is the leader of one of the largest families of asset funds at Pimco. In a nutshell the so-called "Bond King" wrote in his July 31 letter to investors his belief that equities' current return can't be sustained and will be substantially diminished in future.

Siegel, who wrote one of the biggest bestsellers in finance, "Stocks for the Long Haul," rebutted a day later on CNBC, restating his belief that, despite some down years, stocks remain good long-term investments.

That these big hitters are duking it out is important for every investor because it signals that even the brightest economic minds are not sure about the future returns of stocks.

If they're not sure, what are we supposed to do as investors?

Both agree on the return portion of dividends as a total of stock returns, which historically has totaled slightly less than half of total return.

That percentage can't be ignored, particularly in a market environment like this one where GDP numbers are collapsing all around the globe and the growth prospect of companies and their stocks are all the more in doubt.

The one statistic that has undeniably buoyed stocks in the past two years above all others has been the dividend yield of the S&P 500, even now at 1.94%. Nearly 2% isn't the greatest yield the S&P 500 has seen; in fact, it is one of the smallest historically .

But what has put so much upwards pressure on stocks has been the relative return of other assets, particularly bonds. The yield on the S&P 500 is still outpacing the yield on 10-year Treasuries by more than 40 basis points.

With the continuing downwards pressure on Treasury yields exerted by the Federal Reserve, we should continue to see relatively strong stock prices.

But here's where Gross (and British investor Jeremy Grantham for another) might be right: The continuing returns of stocks that we have enjoyed for the past two years may have just about run out.

Two years ago the spread between the yields of stocks and bonds was almost three times what it is now, with little more that the Fed can do to pressure Treasury yields down further.

In the next several years, I think the master at Pimco will be right -- returns on stocks will not be the "historic" average of 6.6% often quoted by Siegel and others; it will be far less and not particularly impressive, especially for investors who need yield to retire and live on.

Now is the time to start looking over your portfolio and find assets that can continue to provide yield, even if their prospects for growth aren't their deepest calling card.

While I want to get investors thinking about other investments than traditional "growth" stocks for the next several years, I'm not about to give ultimate direction on where that value might lie. It could be in farm land or other real estate, perhaps in some hedge basket of commodities or perhaps a new emerging-market fund.

I am an energy guy, so I can give you some ideas in that space. I have continued to support the idea of dividend multi-national integrated energy companies as a core holding, particularly Exxon Mobil ( XOM) and Royal Dutch Shell ( RDS.A), both of which are making what I consider the right long-term moves in energy and both of which have unassailable dividends and stock buyback programs.

Another place to look is energy trusts and master limited partnerships. These are more risky, but with six or more of them in a portfolio you can minimize some of that risk and still yield a comfortable 5% or more.

One secondary in the space today stands out as an opportunity -- MarkWest Energy Partners ( MWE) , yielding almost 6% based upon its current stock price.

At the time of publication the author had positions in XOM, RDS.A and MWE.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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