Dividend-Paying Stocks a “Good Alternative” to Bonds?

The Wharton School of the University of Pennsylvania, which serves as UPenn’s business school, was founded in 1881. Through its online business journal, known as Knowledge@Wharton, the school shares a variety of insights through interviews, analysis and research, book reviews, and more. In a recent article, “When Dividends Pay Dividends – and When They Don’t,” Knowledge@Wharton shared some of Jeremy Siegel’s thoughts on dividend investing. While sharing those thoughts, Siegel, perhaps best known for his book, “Stocks for the Long Run,” also revealed his current feelings toward bonds.

“Siegel believes dividends are a good alternative for a portion of the typical investor’s fixed-income holdings. Investors can find generous dividend-paying stocks and mutual funds, and Siegel suggests that the risks of stock losses are acceptable, as the average S&P 500 or Dow stock is trading at a relatively low price relative to earnings.” Notice the use of the word “alternative.” According to Knowledge@Wharton, Jeremy Siegel is advocating investors shift a portion of their fixed-income holdings into stocks and that the risks of stock losses for an “average” S&P 500 or Dow Jones Industrial Average stock are currently “acceptable” due to a “relatively low price relative to earnings.”

Source: Learn Bonds

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