Triangle Investors

Investing for Income November 28, 2007

Posted by Andy Robinson in : Market Research , trackback

Traditionally one thinks of using bonds as an income source in retirement, but with yields on the 10 year Treasury note dipping under 4% recently and inflation still a strong concern, other options need to be found. One option that seemed great until six months ago is trading debt quality for higher yields. In an effort to beat treasury returns, financial institutions bundled together lower-quality mortgages and individuals bought high-yield bond funds. In this environment, we still need to shun low quality debt because it loses a lot of value in an economic downturn. I agree with this WSJ article that investors seeking income need to consider picking up value stocks. The recent pullback has given many companies, particularly financials, a much more attractive yield than treasuries. And over time, dividend-paying stocks offer protection against inflation because, as a company’s income rises, so generally does its dividend.