What should investors consider when it comes to the future of their returns? Wes Moss was recently quoted in Barron’s with the outlook on stock market volatility and what investors should consider when it comes to long-term investments that pay well over time.
Dividend Income Tops Yields on Bonds
Stock dividends not only can damp the volatility of a portfolio’s total return, they can be a proxy for traditional bond yields at a time when fixed-income yields are so minuscule, says Wes Moss, chief investment strategist, and partner at Capital Investment Advisors in Atlanta.
“For certain investors shifting a portion of bond allocation towards dividend income certainly makes sense,” Moss says. “Stock dividend yields are substantially higher than the 10-year Treasury bond yield, and in many cases higher than the 30-year Treasury.”
The current average dividend yield on the S&P 500 is 1.78%, less than half the historic average of 4.3% but nevertheless attractive compared to the 0.87% yield on the 10-year Treasury and 1.67% on the 30-year Treasury.
Of course, dividend stocks aren’t the same safe harbor as Treasuries, and when assets are shifted from bonds to stocks, investors can be taking on more risk. Portfolio ballast must be preserved with careful planning around asset allocation.
But dividend payers have historically provided higher returns with less volatility than the broader stock market.
Read the original article on Barron’s.
