Be Careful When Chasing Stock Yield

Take care before joining the herd of investors who are moving out of bonds and into dividend paying stocks in search of higher yields.

That’s according to the WSJ‘s Jason Zweig who worries that investors are not considering the fact that stocks carry higher risk of loss than bonds.

His example — the Standard & Poor’s “dividend aristocrats” which includes the the companies in the S&P 500 index that have raised their dividends every year for at least 25 years in a row.  Despite an average yield that was twice that of Treasury bills, the index fell 21.6% in 2008.

The aristocrats dividend index has been popular among ETF investors with the SPDR S&P Dividend ETF (SDY) taking in over $100 million of new money in 2009.

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