Without doing the analysis, I suspect much of the bonds/notes return is is based on its appreciation resulting from interest rate cuts. This works the other way too. Many have speculated that the bond market is the next bubble that will burst as inflation returns from Obama printing money to fund his initiatives.

As what dividend stock can out perform a 6.5% bond, obviously any stock that is currently yielding more than that and maintains it dividend could. Possible examples here would include: PGN 6.61%, AFL 6.73%, BP 8.39%, O 9.12%.

From a more traditional way of looking at dividend investing (lower current yield, but strong dividend growth, you would have to consider these companies (yield/growth)[NPV of bond difference @6.5%/Yield on Cost after 20 years]:

PG (3.22%/10.7%) [$892/24.6%]
JNJ (3.37%/10.8%) [$1,136/26.2%]
KMB (4.82%/8.8%) [$1,999/26.0%]
PEP (3.29%/13.0%) [$2,545/38.2%]
UTX (3.58%/15.0%) [$6,956/58.6%]

I could go on, but you get the idea. These aren’t scary dangerous companies. The NPV number is square brackets is how much per $1,000 invested you would earn if the assumptions hold true.

You can model this for yourself using my DF4-PreScreen.xls model.

In addition, after 20 years most stocks will have appreciated, while bonds will not have. I have never seen a study showing bonds out performing stocks over the long-term.

Best Wishes,
D4L

If you look over the past 10 years, bonds have consistantly outperformed dividend stocks…by a lot. In today’s environment, the chances of your common stock picks’ dividends being cut have never been higher since the Depression.

Of course, this fact would significantly discount the importance of your site, but those are the facts. You are leading your clients down the wrong path…in my opinion. The next 2-3 years…it’s all about the safety and yield and that means good quality corporate paper…Yes, there is plenty of risk in them too, if you are not staying the course to their maturity, too.

Best Wishes,
D4L

Yes, they have to hold them to maturity, but so what? You get a 3-5 year piece of paper paying you over 6% in an A rated bank. These banks are not going out of business folks!

Never pay over par! Stick to the banks who’s stocks have weathered this storm over the past year..There are a few…Bank of NY, JP Morgan, Morgan Stanley, Goldman Sachs…You can also get Georgia Power notes paying over 6% at well udner par..As good as what is being recommended here in common with huge dividend cut risks.

With all due respect to this author, ever heard of Robert Conrad? He is also a utilities expert….It doesn’t work! By time they have trouble (common) and you find out, you are screwed!

Best Wishes,
D4L