Dividend Stocks Paying Outsized Yields

It's apparently going to take a prolonged stock market rally with no corrections to get investors back into equities this year. Their risk-averse posture has them cowering in bonds, despite the Dow Jones Industrial Average's close above 13,000 and the S&P 500's best February performance in 14 years. That means the average investor is likely missing out, once again, on gains that could make up for the losses of the past few years. One way to stick a toe back in the market is to buy stocks of financially strong companies with high, growing dividends.

Despite the stock market rally. S&P 500 stocks have an average total return of 9.5% this year, including a yield of 2.1%. In comparison, one of the biggest bond funds, the top-ranked Pimco Total Return(PTTRX_), has a total return of 2.92%. Logic would tell you that high-quality stocks with steady dividends would probably be the place that investors should be, since they offer both the chance for share-price appreciation and big yields. And given that dividends accounted for about 45% of the S&P 500's return over the past 80 years, such stocks' long-term appeal should be unquestioned.

Source: The Street

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