The quest for sustainable long-term returns seems to be legendarily treacherous these days, but MoneyShow's Howard R. Gold, also of The Independent Agenda, has gathered a few suggestions from top income experts.
Investors love yield and hate risk. Why else would they still be dumping equities and chasing overvalued fixed-income investments like Treasuries, TIPS and high-yield bonds?
But the one bright spot is dividend-paying stocks: As of late August, $13.6 billion of investors' cash has flowed into dividend-stock and equity-income mutual funds this year.
Higher yields than Treasuries and the prospect of share-price appreciation make dividend-paying stocks look like the Holy Grail of investing. Yet certain sectors, such as consumer staples, already are in "nosebleed territory," Barron's recently reported.
And a couple of weeks ago, bond maven Marilyn Cohen called dividend-paying stocks "the most crowded trade ever."
- Read Howard's take on the three most overvalued assets.
Last week, I moderated a panel at the MoneyShow Chicago whose theme was income investing. A couple of the panelists I talked to later thought there were still opportunities in dividend investing-if you're selective.
"There's still a...difference between what you can get in bonds and what you can get from dividend-paying stocks," said Roger Conrad, editor of Utility Forecaster.
And Mark Skousen, editor-in-chief of Forecasts & Strategies and the author or more than 25 books on economics and markets, was even more bullish. "We're in the sweet spot for income investing-it doesn't get better than this," he declared, pointing out that "alternative investments-savings accounts, T-bills, long-term Treasuries [have] just awful returns."
"People who are in those are scared," he continued. "They don't want to lose their principal."
But if they looked a little harder and took a bit more risk-as Federal Reserve chairman Ben Bernanke wants us to-they might make more money and paradoxically be less exposed than they are in many bonds and bond funds.
Unlike bonds, said Conrad, "dividend-paying stocks follow the overall stock market. Historically there's not much of a link to bond yields."
So when interest rates start rising again, bonds could be hit harder than dividend-paying stocks. But which ones should people look at?
- Read Howard's take on what the latest polls show the about the impact of the first debate on the election.
Skousen thinks you can find better yields by doing a little digging.
NEXT: Good Picks for Dividend Investors