The conventional wisdom is clear: Bonds are best for
people in or near retirement. They provide the desired income
and can be much more reliable than stocks. Well... yes and
no, if you ask me.
Bonds do have some advantages. Those issued by the U.S.
government offer income that's rather dependable. Even
corporate bonds can be fairly reliable. That's a big deal,
but beyond that, I'm having trouble coming up with other
advantages. Oh, here's one more -- bonds can offer some
diversification to your portfolio, as they don't always move
in step with the stock market.
Stocks, though, have many advantages:
stocks have outperformed bonds. Period. They have done
so more than 95% of the time in the 20-year periods between
1871 and 2006.
Dividend-paying stocks can offer yields that top those
of most bonds. Last time I checked, government bonds with
two- to 10-year maturities had yields of around 1% to 3.5%,
while 30-year bonds offered about 4.25%. Well, it's not
hard to find solid dividend stocks paying yields of 3% or
more. Take a look at these stocks:
Company
CAPS
Stars
(out of 5)
Recent Yield
5-Year Dividend Growth Rate
BP (NYSE: BP)
*****
5.8%
14%
PepsiCo (NYSE: PEP)
*****
3.0%
17%
Procter & Gamble (NYSE: PG)
*****
3.1%
12%
Kraft Foods (NYSE: KFT)
****
4.3%
9%
Valero Energy (NYSE: VLO) Continued... |