| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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3 Firms Whose Shares Outdo Their Bonds |
SmartMoney - Oct. 28, 2010 - by Jack Hough
The trade-off that has long existed between the twin pillars of investment income – corporate bonds and dividend-paying shares – has shifted lately in favor of the latter.
Read more: 3 Firms Whose Shares Outdo Their Bonds - Investing - Stocks - SmartMoney.com http://www.smartmoney.com/investing/stocks/3-firms-whose-shares-yield-more-than-their-bonds/#ixzz13fUkODr8
For investors, the deal is supposed to work like this: Bond buyers get higher current income, all else held equal, and better payment protection, because companies would much rather trim their dividends than go into default. They also get a steadier ride; bond prices can fluctuate according to changes in interest rates and creditworthiness, but the volatility is nothing compared with the stock market's frantic swings.
Dividend collectors, meanwhile, are supposed to get better inflation protection, because prosperous companies often increase their payments over time, while their bond coupons are usually fixed.
Tax treatment is up to whims of politicians. At the moment, bond interest triggers regular income tax at marginal rates of up to 35%, but the rate on dividends is capped at 15%. (The dividend tax break is set to expire at the end of the year, barring an extension from Congress.)
Two changes have turned the tables on these securities. First, corporate bond yields are absurdly low, partly because the Federal Reserve has held the nation's core borrowing rate near zero for more than a year and a half, and partly because, weak economy or not, America's companies are highly profitable and flush with cash, making many of them a good credit risk. Corporate rates have fallen so low that some companies now pay less on their short- to medium-term bonds than on their shares. That's especially so when bond yields are calculated to maturity because many bonds now sell at a premium to their maturity value, meaning full-term holders will give up some principal as they collect interest. The three companies listed below are examples.
The second change is a rise in inflation fears, as evidenced by the inflation-protected Treasury bonds, which recently sold with negative yields – that is, with buyers paying the government for inflation protection. If that is a predictor of consumer prices, the inflation-beating ability of shares could prove particularly important in coming years.
Home Depot
Shares: 3.0%
Five-year bonds: 2.2% to maturity
A house foreclosure crisis can help Home Depot (HD: 31.10*, +0.20, +0.64%), up to a point, at least. Repossessed properties might sell for lower prices, but so long as they sell, many will need a coat of paint here and a refurbished kitchen there. Sales for Home Depot are expected to rise steadily, if modestly, through January 2012, lifting profits with them. The company's dividend yield is 3%, whereas an S&P 500 index fund pays 2%, but it understates the amount management spends on shareholders. In the first two quarters of its current fiscal year, Home Depot spent more than $1.2 billion to repurchase its shares, while making just under $800 million in dividend payments.
Read more: 3 Firms Whose Shares Outdo Their Bonds - Investing - Stocks - SmartMoney.com http://www.smartmoney.com/investing/stocks/3-firms-whose-shares-yield-more-than-their-bonds/#ixzz13fUnlFaU
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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