On Monday June 1st, The S&P 500 closed at around 1278 and Treasuries reached record low yields the same week with the 10-year yielding below 1.5% and the 30-year under 2.6%. Has this market bottomed? I cannot predict the markets, but over the many years that I have invested in stocks I have noticed that when yields on "safe" securities like government bonds are lower than yields on quality stocks-it is time to consider putting some cash to work in some great companies.
Currently the Dow Jones Industrial Average is yielding about 2.7% and the S&P 500 is yielding about 2.16%, but even though those are decent yields, I really want to focus on some great quality companies and their yields. For example I can look at some of the great Dow Industrial companies such as Microsoft (MSFT) which is currently paying a dividend yield of 2.7% or maybe Intel (INTC) which yields an unbelievable 3.18%. Both companies happen to be in the technology sector, this can be a very volatile industry to invest in, but there is a good chance of appreciation that can perform better than the indices.
The Technology sector may scare many investors, so if that is the case then just look for a different sector. There is the Utility sector which has many good dividend yields such as American Electric Power (AEP) which yields 4.7% or maybe an investor can invest in a Consumer Goods company such as PepsiCo (PEP) or Ketchup maker H. J. Heinz (HNZ), both with yields well over 3%
I my opinion quality stocks are looking rather cheap these days and when you put their yields in the mix, there is no reason that one has to invest in treasuries. I believe that cash can be put to work in many of the great companies out there and while they may rise or fall, you can be rest assured that they will happily pay you a juicy dividend. Let me know what you think?
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