Stocks That Beat Treasurys

Nervous times again. Suddenly everyone is afraid of a double dip. The Dow Jones Industrial Average is down six weeks in a row, tumbling below 12,000 for the first time since the Japanese panic in March. Nervous investors are stampeding into the "safety" of Treasury bonds instead, driving up prices across the board. Should you follow suit? The rush into Treasurys has driven the yield on 10-year bonds tumbling, below 3%. Meanwhile, the sell-off on Wall Street has driven stock yields in the opposite direction.

You can now find top quality blue-chip stocks that offer dividend yields better than 3%. No, they're not perfectly comparable. Stock dividends, unlike Treasury coupons, aren't guaranteed. But neither are they capped: Over time, companies increase their dividends. Regular Treasury bonds don't hike their coupons after a good year. Furthermore, bond coupons are taxed as ordinary income. Stock dividends are taxed more lightly.

Source: SmartMoney

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