Best Wishes,
D4L

As has been pointed out here by others the prices have been pushed up (and thus yields down) to ridiculous levels from which you can lose a heap of money with very little possible upside potential.

I set up a paper/model high yield (dividend) portfolio of UK stocks around November last year and I’m dreading going back to it because value/dividend stocks have been hit so hard in the past 12 months. I suspect if you’d done that analysis at the end of 2007 you’d have got a different result.

Re: Utilities, in the UK at least they’ve performed so well in the past few years (and held up reasonably well in the recent bear) that you can’t help feeling they’re due an upset. But I hold a water and an energy utility, and I regret the top-slicing I did with them, too!

I’d suspect I’d prefer them though as an each way bet on inflation / deflation, to government bonds.

Have you looked at corporate bonds? They’re being touted as the big opportunity by some, but I can’t help thinking if bonds do well from here, equities will soar. But they do look very cheap from a spread against government’s perspective.

No good in a new Great Depression, of course.

Government bonds: An exciting new way to lose money to the bear market

DGI: I believe there will be many bubbles to burst before this is over with. Stocks and bonds generally run counter to each other, but I can’t stomach anything more than a 10% allocation. I view CDs as cash, not investments.

Monevator: Utilities have been good to me the last couple of years, and as noted in Dividend Investing vs. S&P Index Fund they outperformed the s&P since September 1997.

Best Wishes,
D4L

If I can be permitted a rare link, readers might like the case for bonds being in a bubble here:

http://monevator.com/2008/12/08/government-bonds-an-exciting-new-way-to-lose-money-to-the-bear/

For a dividend investor, I wonder if the utilities provide a decent compromise. The yields look low compared to general market yields (compressed) but I believe they also were massively bought in Japan’s deflation. But at least you get some potential upside if things don’t turn more inflationary, too, compared to bonds which would be massacred at these yields.

As for fixed income allocations, I like keeping it in CD’s, which don’t appreciate if rates drop, but always have your principal protected, even if rates were to increase..

If you are a total returns investor, a 50/50 allocation of SPY/TLT could be ok for you.. If you are a dividend investor, however, then rising dividend stocks are the way to go!