Would you leave almost half of your net worth in cash — knowing that it was losing value in inflation-adjusted terms — just because the conventional wisdom told you to?
Because if you have a large chunk of your wealth in bonds, that’s essentially what you’re doing.
Many advisors still believe that a sizable bond allocation can help investors boost their long-term returns because the bonds will outperform stocks during bear markets — except that they don’t.
2020 was the perfect test case for the supposed protective power of bonds. A devastating black swan event — specifically an unforeseeable pandemic which has killed millions and shut down the global economy — sent stock markets plummeting. The S&P 500 lost more than 33% of its value between when the selloff began in mid-February and when it abated in late March.
And yet over the course of the year, the stock index handily outperformed two of the most popular bond funds, the Vanguard Total Bond Market Index Fund ETF (NYSE: BND) and the Vanguard Long-Term Treasury Fund (NYSE: VUSTX)
Part of the reason for this is a dearth of yield from most investment-grade bonds, motivated by a decade of Federal Reserve overnight rates that are negative in inflation-adjusted terms. And those ultra-low rates aren’t going away anytime soon, according to Federal Reserve Chairman Jerome Powell.
“We think that the economy’s going to need low interest rates, which support economic activity for an extended period of time — it will be measured in years,” he said at a recent press conference.
So in this economy, where bonds aren’t even paying enough to be useful as a parking spot for money, what’s a conservative or income-oriented investor to do?
Many have been turning to a different kind of asset — one that offers far higher yields and capital gains than bonds, but which theoretically carries more risk: dividend stocks.
Many dividend stocks currently offer yields that should exceed Treasury yields for years to come, if they can maintain their payouts.
And that’s easier said than done. 2020 was a rough year for bonds, but it wasn’t especially kind to every dividend stock, either. Dozens of previously-reliable players — including longtime income investor darlings like Disney (NYSE: DIS) — cut or paused their payouts during the pandemic.
Others, however, didn’t. In our research team’s latest report, 8 Pandemic-Proof Dividend Stocks Which Yield More Than Bonds, we’re looking at a select group of eight dividend stocks with multi-decade track records of consecutive annual dividend increases which have continued through the pandemic.
These eight companies have safeguarded their dividends against future disasters by keeping them low relative to earnings per share (EPS) — and by growing EPS through the pandemic.
And best of all, all eight stocks yield far more than Treasury bonds.
Inside the report, you’ll find:
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Four financial services companies that took proactive measures to get ahead of COVID-19 devastation,
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A commodities processor that is on the front lines of COVID-19-related supply chain shortages around the world,
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An energy company whose frugality has kept it profitable through the crisis,
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And two health and sanitation supply firms that have been among the most recognizable symbols of the fight against COVID-19…
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