Dividend Stocks: The New Bonds

As retiring Baby Boomers look for ways to pay the cable bill and buy a few rounds of golf or new iPad, dividend stocks could help fill the void. According to fund research firm Lipper, more than $5 billion has gone into funds that invest in dividend or equity income since October. This is on the back of the more than $7.8 billion, equity income funds attracted in 2010. One of the biggest attractions to dividend paying companies is how they can withstand inflation. From 1975 through 1980, when inflation was as high as 14.4%, dividend stocks gained nearly 38%, trouncing inflation. Those companies with a history of raising payouts are especially warranted. Unlike a bond which pays a fixed rate, with stocks you could potentially get a higher dividend year after year.

With a variety of new risks affecting the bond market, investors are starting to rethink the asset class. Investors looking for good income from their portfolios are beginning to take a hard look at dividends once again. Equity income funds have surged in assets and may be one of the best ways to get inflation protected income from a portfolio. Funds like the SPDR S&P Dividend (NYSE:SDY) or individual stocks like Sysco (NYSE:SYY) make ideal positions.

Source: Investopedia

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