Occasionally, I pen a column that strikes a nerve with readers and I get a few emails questioning my sanity. Such was the case with a recent piece on dividend-paying stocks. My inbox filled up as people pointed out the zero-interest-rate policy makes high-yielding stocks a great alternative to traditional income investments. Since I have been saying that for three years, I am well aware of this fact. But high-yield stocks were not just a great income alternative three years ago, they were cheap. Stocks may still look good compared to T-Bills or CDs but, for the most part, they really are not cheap anymore. The dividend bandwagon has gotten very crowded.
The market is making my case for me. We have had a great rally since the first of the year but many of the dividend favorites are actually down year to date. This morning I ran a screen of high-yielding stocks that are down on the year. Many of the stocks suggested by the newly minted dividend geniuses at year's end are down for the year in spite of their attractive payouts. Pfizer (PFE), Philip Morris International (PM) and other stocks that were featured alternatives for fixed income investors have not participated in the rally. The leading telephone stocks have not done much, as Verizon (VZ) is down slightly and AT&T (T) is flat year to date. Many of the leading utilities are selling off in the new year despite their attractive dividends and talk of increased economic activity. When something is widely known in the stock market, there is a very good chance it is no longer true....397 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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