Dividend Stocks: A Non-linear Approach To Higher Yields

Investors today are the unintended victims of the linear thinking that has permeated through today’s government policies. A friend of mine shared his parents’ experience with me that many retired workers can relate to. After years of working hard and prudently saving for retirement, my friend’s parents felt that their nest egg was large enough to retire and live off the interest. At the time, their accumulated savings of $500,000 was invested in long-term Treasury bonds yielding roughly 6 percent. The annual interest of $30,000 satisfied their needs.

Don’t be limited by linear thinking in your portfolio. As an alternative to low yielding Treasury bonds, consider resources stocks that pay dividends. We’ve found that most materials, utilities and energy stocks in the S&P 500 Index (SPY) pay a dividend higher than the 10-year Treasury: Materials (XLB) and utilities (XLU) companies yield an average of 2.3 percent and 4.1 percent, respectively, while energy (XLE) stocks pay an average yield of 2.2 percent.

Source: Forbes

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