Another semi-conservative option I am considering for my Ameritrade side-bet goal is buying stocks with high dividends. Due to their favorable tax rate of 15%, a semi-sluggish stock market, and itty bitty bond yields, dividend-paying stocks are getting popular. Here are some of my findings:
There are many ways of getting into the action, my leading favorite is the ETF iShares Dow Jones Select Dividend Index fund (DVY) that invests in dividend-paying stocks. DVY owns the 50 highest-yielding stocks in the Dow Jones Total Market Index, excluding real estate investment trusts (they don’t get the 15% tax rate). The expense ratio is also a very reasonable 0.40%.
Dogs of the Dow is a strategy that involves picking the ten stocks of the Dow Jones (DJIA)which have the highest dividend yield within the last year. I have heard some good things and more bad things about this strategy. Here are some performance comparisons, note that they lag the S&P 500 in the long-term, but are much more stable.
Even the semi-famous bull Siegel now has modified his position to support buying dividend paying stocks. An interest except is the assertion that the 100 highest-yielding stocks in the S&P 500 have done better than the index as a whole over the past 50 years. Hmm, but could you identify those stocks ahead of time?
By Jonathan Ping | Investing | 2/16/05, 1:21pm