Diversified Dividend Picks for the Next 5 Years

While stocks might look risky in the short-term, they offer the highest yield in the long-run, says Prof. Jeremy Siegel, of the University of Pennsylvania, Wharton School of Business. In his book Stocks for the Long-Run, Siegel suggests that stocks offer more stable real returns than bonds in the long run, thanks to the mean reversion effect.

His book also offers many different ways for choosing the best stocks for the cheapest price. One of the interesting methods suggested uses a combination of three metrics: A rule of thumb for stock valuation that is found on Wall Street is to calculate the sum of the growth rate of a stock's earnings plus its dividend yield and divide by its P-E ratio. The higher the ratio the better, and the famed money manager Peter Lynch recommends investors go for stocks with a ratio of two or higher, avoiding stocks with a ratio of one or less.

Source: Seeking Alpha

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