Dividend Stocks: Cool Again! Also: Risky

As investors ponder what in the world constitutes a reasonable investment decision these days, staid old dividend-paying stocks have been getting the sort of attention they haven’t received in decades. The dividends on such stocks can exceed the yield on bonds offered by the same company, and the stock price can appreciate as well, offering a seemingly ideal set-up at a time when 10-year Treasury yields keep bobbing around 2%.

Not so fast. While dividend-paying stocks have been one of the most sought-after investments this year, they bear risks, notably that they will again fall behind if the rest of the stock market finally rallies. Still, the market is likely to continue to see support from retiring baby boomers in search of steady income, and proponents point out that if stock markets start on another bull run people will be too busy celebrating their broader portfolio gains to begrudge dividend-paying stocks for underperforming a bit.

Source: Baron's

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