For the first time in 15 years, a usually-small bonus payout is earning investors more money than long-term corporate bonds!

• Dividend-paying stocks are handing a higher return percentage to investors than corporate bonds issued by the same companies, in part because in the short-term, companies are pretty flush with cash, but nobody knows what the long term holds.
• The recession drove down the prices of most S&P 500 companies, but at the same time their profits have soared. This means their stock prices are relatively cheap, considering the health of the companies.
• Bond yields have been low since the start of the recession for many reasons, including the Fed’s rock-bottom interest rate and uncertainty about the future of the economy.

Facts & Figures

• Interest on 10-year Treasury bonds was 2.42% last month
• Kraft dividends are up to 3.82% – that’s 0.18% higher than their bonds expiring in 2018

Best Quote

“The economy is slowing down, but productivity has been so great in this country and companies have been able to make good profits,” said Duessel, the Pittsburgh-based equity market strategist at Federated. “Companies that would have cut their dividends already did so. It’s an unusual time where, yes, their profits are good, their cash is good, they can afford to pay more in dividends.” – Linda Duessel, Equity Market Strategist for Federated Investors

Tags: bonds, dividend coverage ratio, dividends, P/E ratio, profit, recession