For Better Yields, Look to Dividend Stocks

In a grinding market, a smart strategy involves hunting for yield getting paid to wait. There's not much yield in Treasurys. Cash isn't paying anything. And municipal bonds face uncertainty as governments work feverishly to get budgets back in order with varying degrees of success. That leaves the stock market as the best place for yield hunters right now. And, thankfully, there is no shortage of opportunities.

Dividends have long been part of a prudent investment strategy. Since 1926, about 40% of the total return of the S&P 500 has come from dividends. The dividend yield on the S&P 500 rose to 5.53% in 1979, but then declined steadily, falling to 1.14% in 1999 before starting to edge higher. This time, the backdrop for dividends looks strong. The companies in the S&P 500 have a record $1 trillion in cash, and continue to generate lots of it. Analysts expect earnings for the second quarter to rise by 14.1%, according to FactSet, a data provider.

Source: Smart Money

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