Investing in a dividend stock purely for income purposes is a strategy many retirees or cash-strapped investors engage in on purpose.
Whether it is bonds (which are expected to hover at or around face value) or equities, buying a security for the express purpose of receiving a yield and either reinvesting said yield or taking the cash to the bank has proven to be a much better strategy with equities; in recent years, investors seeking yield have moved away from bonds and toward securities for the higher-than average yields offered by certain sectors alongside capital appreciation gains not found in bonds.
On the Dow Industrial Average, however, it is very hard to find equities with yields in the mid-to-high range, due in part to the fact that the companies listed on the Dow are 30 of the biggest companies in the world. Yield is not necessarily what investors go for when looking at stocks on the Dow – the safety, size, and stability of these firms is usually what drives an equity purchase in one of these firms.
Currently, the highest yielding stock on the Dow happens to be Verizon Communications Inc. (NYSE:VZ) at a yield of 5.3%, not too shabby for a company worth nearly $180 billion. Investors who have heard of the “Dogs of the Dow” investing strategy would know that Verizon currently ranks number-one as the top pick for this strategy due to its listing on the Dow and its correspondingly high yield.
Investors really have no way of knowing which direction the market will move, however picking a dividend stock such as Verizon may be one play with less risk than others, in today’s frothy market.
Invest wisely, my friends.
