By Xavier Brenner

Dividend-hunting investors face a quandary.

US Treasury bond yields are at ridiculously low levels and are likely to be so for a long time to come.

The yield on a 10-year bond is all of 1.55% !

At the same time, the stampede into dividend stocks has pushed them up to very pricey levels.

 

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Stampede

Look at the chart below compiled by MarketWatch showing the performance of sectors like telecommunications, utilities and energy, where companies tend to pay higher dividends.

 

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They are all up by double digits so far this year through August 5.

 

Pricey

It's true that many dividend-rich stocks have been bid up to lofty levels.

It's also true that history shows that a portfolio with a healthy dollop of dividend stocks is going to outperform in the long haul all things being equal.

The S&P 500 total return index, which factors in the index's dividends and reinvests them, has outperformed the S&P 500 index by a wide margin going back to 1990, according to an analysis Bespoke Investment Group.

 
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Source: Bespoke Investment Group

 

 

Steady Performers

Where to look?

Analysts and market pundits suggest looking at companies with a steady track record of paying out dividends.

InvestorPlace recently identified five companies that have raised payouts for more than 50 years running.

The are Johnson & Johnson (JNJ) , The Coca-Cola Co (KO) , Lowe's Companies, Inc. (LOW) , 3M Co (MMM) and Procter & Gamble Co (PG) .

 

Takeaway

The search for yield isn't an easy one in the current, ultra-low interest rate environment.

Investors have bid up dividend plays to lofty levels.

That said, you're better off in the long-run having a chunk of your portfolio exposed to high-dividend stocks, in my opinion and according to some money pros.

Photo Credit: Gopal Vijayaraghava via Flickr Creative Commons