Hold On to Those Dividend Payers

For equities, price-to-earnings ratios tend to be the most common way to arrive at a valuation -- and, while the S&P 500 Index has averaged a P/E ratio of 15.5x, as of Tuesday's close it totaled 19.3x. Stocks, therefore, are well above their historic valuations. Equities are still cheap compared with bonds, but U.S. Treasury yields are going up, and at some point this P/E ratio will have to come back to normal.

We income investors tend to be in our investments for the long-term, so the question of when to sell can be the toughest one. When we specifically consider stocks that pay dividends, we must keep in mind that they tend to be less volatile than those that don't: Income will puts a floor under the price of these shares, meaning that if the market drops, these stocks will tend to drop less. By selling these names, in other words, we are also forgoing the income -- so it adds extra weight to holding....490 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

Read the full story and get access to the Real Money Pro trading floor.

There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.

Already a Subscriber? Please login.

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.