Dow Stocks Will Trounce Treasuries

The safety of an income stream -- even a tiny one -- and return of principal backed by the U.S. Treasury are attractive characteristics. However, with currently puny yields and recent inflation reported at 1.7%, U.S. 10-year notes virtually guarantee a loss in purchasing power. I've thought bonds have been overpriced for some time (and been wrong) and recently have been comparing the prospects for 10-year Treasuries against dividend-paying stocks.

For this matchup, five stocks from the Dow Jones Industrials (INDEX: ^DJI) will run a 10-year discounted cash flow gauntlet against Treasuries. The stock team was chosen to get a good mix of strong businesses with established dividend track records, which they maintained through the rough markets a few years ago. I have CAPScalls on and own McDonald's (NYSE: MCD) and Intel (Nasdaq: INTC), and I have a CAPScall on Johnson & Johnson (NYSE: JNJ). 3M (NYSE: MMM) and Travelers to round out the stock team.

Source: Motley Fool

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