Johnson & Johnson (JNJ), The Coca-Cola Company (KO), AT&T Inc. (T): Three High Dividend Stocks to Consider at Market Dips

Page 1 of 2

Wall Street fell recently as high-yielding dividend stocks lost their traction. This was triggered by fears raised by Federal Reserve Chairman Ben Bernanke that the Fed’s bond buying program may soon end earlier than expected. As a result, many dividend stocks fell. Not even the high profile and more stable stocks like Johnson & Johnson (NYSE:JNJ) were spared from falling.

Johnson & Johnson (NYSE:JNJ)

Another probable factor that caused the massive sell-off of dividend stocks is the rising yield of Treasury notes. The 10-year Treasury note soared sharply over the past weeks and it is now close to its 13-month peak. This shifted the interests of many investors from ‘defensive’ stocks to Treasuries, thereby sending the prices of dividend stocks down.

High yielding dividend stocks versus bonds

Stocks and Treasuries tend to move in opposite directions. So, too, with equities and bonds. A high-yielding dividend strategy may potentially give you higher returns from investment, but the risk is high as well. Compared to U.S. Treasures and bonds, your investment on stocks will be on an unstable ground. This is due to the volatility of the market.

Stocks vs. treasuries

For the past 60 years, the worst one-year total returns of a high-yielding dividend strategy were -36%. For a two-year period the worst seen was -39%, and over three years  -33%.

Investing on five-year Treasuries, on the other hand, also has its bad times,  but never as bad as investing in high-yielding dividend stocks. The worst returns for a one-year strategy were only -5.1%, while over two years the worst end at -1.7%. The three-year strategy on Treasuries netted the worst returns at 1.6%.

Similarly, equity investment when compared to bonds may give higher returns, but they can also give worse returns. In another comparative study between equity and bonds, equity showed higher volatility at 20% during the period 1998 to 2008. Bonds’ volatility, on the other hand, was only 5%.

During the same period, the lowest performance of equity, based on S&P 500 index, was high at -37%. Meanwhile, the best performance also peaked at 37%. In contrast, bonds based on Barclays Capital bond index posted the lowest return at -3% against peak return of 18%.

Apparently, there is a wide gap between the worst times of a high-yielding dividend investing strategy and a Treasuries-investing strategy. The same is true between bonds and equities.

The safest mediums are bonds and Treasuries compared to high-yielding equities. But on the downside, the potential returns are also low. You will not be able to maximize the probable earnings of your funds.

Nonetheless, the law of investing still applies regardless of your investment choices. The higher the potential returns the riskier it becomes. On the other hand, the safer the investments the returns are lower as well. But if you invest on the right high-yielding dividend stocks with stable financials, the risk is minimized. Your investment will be arguably safe while giving you long-term high earnings altogether.

Investing strategies on high yielding dividend stocks

If you want to pursue your investing strategy based on high-yielding dividend stocks then do so with well-calculated risk. This can be done by investing in large cap dividend stocks with higher yields. Large cap companies provide a sort of safety net to your investment. They won’t go down overnight. This gives you enough time to bail out, either with minimal loss or still earning while retreating.

Large cap companies with steady cash flows have secured a relatively stable position in the industry. Despite the attacks from competitors, negative speculation and news reports, these companies will survive. While share prices may slow down or take a dip, shares will eventually bounce back over time.

The Coca-Cola Company (NYSE:KO)

One good example is The Coca-Cola Company (NYSE:KO).

The company presently has a yield of 2.63%.

A large cap company with market capitalization of $184 billion, The Coca-Cola Company (NYSE:KO) has been public since 1919. Its present yield is higher than the 2012 average yield of a U.S. 10-year Treasury note at 1.79%. The annualized dividend of The Coca-Cola Company (NYSE:KO) is $1.12 per share, and the yearly dividend increases year-over-year.

On June 4, The Coca-Cola Company (NYSE:KO) inaugurated its $200 million bottling plant in Myanmar. While Burma is a small market, the company’s expansion is a sign of its commitment for long-term growth. This is important for its future performance and financial stability.

Johnson & Johnson

Another good example is Johnson & Johnson (NYSE:JNJ).

The current yield on this stock is at 3.11%.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!