Friday, December 11, 2009

Chasing High Dividend Stocks

Interesting perspective from the WSJ on chasing dividend paying stocks in this low inflation environment.

With the income from bonds withering away, investors are piling into dividend-paying stocks. Investors should be cautious.

...

Don't forget that even today's 2% to 4% bond yields aren't as paltry as they look, because inflation remains close to zero. The 6% interest income you remember earning a decade ago came at a time when inflation ran about 3%. You might protest that inflation, as officially measured, is understated today—but it is probably no more inaccurate now than it used to be. In real terms, you are only slightly worse off now than you were then.

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