Where can you turn for investment yields in these low-interest-rate times? To dividend-paying stocks.
Stocks in the broad Standard & Poor’s 500 index yield over 2% now, on average.
Stocks in the 30-company Dow Jones Industrial Average yield 2.5%, on average. The DJIA is generally composed of very large companies that usually pay dividends.
Both of these stock marked indexes yield more than the 10-year Treasury now. Since 1947, the only other time that has happened was during the stock market crash of 2008-2009, just before the turnaround.
For now, therefore, dividends paid by major U.S. companies are relatively high. The companies are liquid (nonfinancial companies in the S&P 500 hold nearly $2 trillion in cash on their balance sheets) so it’s likely that dividend payouts will be maintained. Indeed, dividends can increase if the economy keeps growing.
What’s more, dividends paid to investors typically are taxed at 0% or 15% in 2012. Some tax relief may continue in the future. Thus, this might be a good time to invest in companies with a history of paying dividends, or in funds that hold such companies.
