High-Yield Dividend Stocks Are Bad News For Your Portfolio

Dividend stocks are all the rage. America's corporations are sitting on tons of cash. And with limited growth prospects and low interests rates, they have no other options but to return that cash to shareholders in the form of share buybacks and dividends. Conservative investors love dividend stocks because they are perceived to be safer than stocks while offering the diversification away from bonds.

"The widespread pursuit of safety in high-yielding stocks has driven up their valuations and increased market concentration in these stocks," writes AllianceBernstein analyst Joseph Paul in a post titled Are High Yield Stocks in Bubble Territory. "It has also caused an alarming surge in their correlation to bonds, so investors may be getting a lot less diversification than they realize."

Source: Business Insider

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