Dividend-paying stocks may have been left behind by this year’s stampede toward higher-risk investments – making them a potentially good option for investors seeking income.
Today, many investors seeking income invest in cash equivalents such as bank accounts, certificates of deposit or longer-term bonds. These vehicles often pay little interest, leaving investors at the mercy of inflation.
Dividend-paying stocks may be a tempting alternative to cash or bonds. They’re certainly riskier than cash or bonds, but they may be less risky than the high-flying growth stocks that dominated the 2009 market recovery. If you’re a pre-retiree or a retiree seeking income, you may be willing to sacrifice return potential for more income potential.
Where can you find dividend-paying stocks?
Try looking at established companies in stabler industries, also called defensive sectors.
These include food and beverages, health care, household goods and even telecommunications.
To make the job easier, you might consider an equity income mutual fund.
These funds tend to seek dividend-paying stocks, thereby doing the legwork for you.
Of course, no single investment is appropriate for everyone.
To determine if dividend-paying stocks are right for you – and to help locate them – it’s best to consult a professional.