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Market Wrap-up for Apr. 29 - Investing for Yield: Don't Wait on the Fed

Yesterday, the Wall Street Journal had a piece that focused on investors who actually want the Fed to raise rates—despite the rest of the market hoping to avoid that day like the plague. The thesis was that some are waiting on the Fed to raise rates so that debt yields will rise again, giving them a safe place to store their money while maintaining a decent yield.

The article briefly mentions dividend paying stocks, but it seemed that the particular investor who had been interviewed had more or less glossed over these securities and was impatiently waiting on the Fed. This mindset is certainly the minority in today’s investing world, but it still persists with a handful of investors who are accustomed to strong yields from Treasuries and corporate debts.

Unfortunately, even if the Fed makes its first rate hike in the near future, it will still be years before bond yields can reach a level that many wish to see. The Fed will likely raise rates very gradually in an attempt to calm the market, and the date of the first line seems to be constantly pushed back.

Rather than wait on the Fed to make their move, we urge investors to look deeper into dividend paying stocks and utilize them in their portfolios.

Turn to Dividends

More than likely it will be years and years before short-term Treasuries and CDs have yields that can help sustain a healthy income stream. For those investors waiting on safer yields, we urge you to take a closer look at dividend paying securities.

While equity investments are a bit more volatile than short term debt, the right dividend paying stock can often be a better investment in the long term. A number of dividend stocks have grown their dividends for more than 25 consecutive years (and some as many as 60). These stocks have shown dedication to their yield and increased it even during multiple recessions.

Rather than hold out for bond yields to jump, there are a number of dividend securities that offer high yields which can add a vital income stream to any portfolio. Finding the right stock for your portfolio can seem like a tall order, but our Best Dividend Stocks list aims to lighten the load for you and identify the strongest dividend securities on the market.

The Bottom Line

Likely, many of you are already dividend investors who are comfortable with using these securities in your portfolio. In this case, a reminder of why dividends are a strong investment (and preferable to other avenues) is always a healthy exercise. But for those of you who have their eyes set on higher yields from the fixed income world, we urge you to take a step out of your comfort zone and consider adding dividend stocks to your portfolio.

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