Dividend Stocks: An alternative to bonds

There are many alternatives to treasury bonds for conservative investors who wish to generate income while controlling risk. For this article we will focus on the possibility of using dividend paying stocks as an alternative.

It must be stressed that dividends on common stock are not contractually protected obligations of the company. The Board of Directors is almost always free to pass common stock dividends at any time. As a result, investors looking for income must examine a company’s track record over many years, the competitive advantages of the business, and make an assessment regarding future prospects for the dividend. Simply buying the highest yielding stocks is a recipe for disaster.

Source: The Rational Walk

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