Income Redux: Dividend Stocks vs. Savings Accounts

A quick peek at the widening yield spread between a basket of diversified high-yielding multinational stocks and the best savings account rates:

 

Dividend Stock Portfolio (4.04% yield)

Southern Copper (SCCO) 6.98%

Eli Lilly (LLY) 4.96%

Total (TOT) 4.90%

Merck (MRK) 4.48%

Kimberly-Clark (KMB) 4.14%

Waste Management (WM) 4.03%

Vodafone (VOD) 3.80%

Intel (INTC) 3.37%

Chevron (CVX) 3.12%

Coca-Cola (KO) 2.94%

McDonald’s (MCD) 2.90%

Microsoft (MSFT) 2.75%

 

Source: Seekingalpha.com

 

Savings Portfolio (1.27% yield)

Savings Account 1.01%

Money Market Account 0.90%

1-year CD 1.15%

2-year CD 1.25%

3-year CD 1.48%

5-year CD 1.85%

 

Source: MoneyRates.com, RateBrain.com, SavingsAccounts.com, Interest.com

 

A Savings Idea that Earns More than the Rest

Trying to beat a 3% return on your savings these days is nearly impossible.

The highest online savings and money market rates are close to 1.20%. You can CD rates slightly over 3%, but you have to pick at least a 5-year maturity. Even the 10-year Treasury Bill dipped below a 3% yield this week. As for bond funds? Yikes, that’s a time bomb. No thanks.

Dividends yields are looking much better than they did a year ago. And there is value in some underpriced stocks. But with the economy still weak, do you want to put your money at risk just to earn that 3% or 4% dividend payout?

Savers are really getting hammered because right when that 3% return on their savings seems impossible, food and energy prices have shot up.

There is one sleeper investment that is earning well over 4% and is 100% backed by the federal government. Safe, secure and kicking out more income than the rest.

Savings bonds.

These aren’t your grandpa and grandma’s savings bonds, but the inflation-indexed variety.

With a nice little CPI adjustment made on May 1, Series I bonds are now earning 4.60% until next November. The downside is that you have to hold onto your savings bonds for five years to avoid paying a penalty when you trade them in. But if you are looking for a investment that tracks inflation for a portion of your portfolio, don’t forget about the Series I bond. They also have some tax advantages than can help you save money.

Here is more information on the Series I Savings Bond http://www.interest.com/cd-rates/news/i-bonds-set-to-soar-in-may/ from an article published on Interest.com

The Fed, QE2 and Interest Rates

The Federal Reserve launched an ambitious bond-buying program to help the economy create jobs and growth.

The program, called Quantitative Easing 2 (QE2), is slated to end next month.

Now that the end is near and another round of Fed market intervention (QE3) seems likely, it is time to ask the question: who benefited?

Savers? No.

The unemployed? Just marginally.

Investors in stocks, gold, oil and other commodities? Yes.

An article on CBS MarketWatch did a good job laying out the real result of the program.

 

The truth? QE2 has created a massive new bubble in dollar-based financial assets, from stocks to gold. Meanwhile, it has had zero visible effect on the real economy.

Take jobs. According to the U.S. Labor Department, since last August the number of full-time workers has gone up by just 700,000, from 111.8 million to 112.5 million.

At a cost of $600 billion, that’s $850,000 a job

 

Sure, there is a little bit of Monday-morning quarterbacking going on here considering the U.S. economy was teetering on recession when the program was launched. But those facts are hard to ignore. Similar to how TARP dollars went to shore-up bank balance sheets (instead of increasing consumer loans), there appears to be a bait-and-switch with the Fed bond-buying program. Savvy investors (and probably hedge funds) made out like bandits, while the economically-depressed are stuck in neutral.

Read the rest of the Marketwatch article at http://www.marketwatch.com/story/qe2-was-a-bust-2011-05-21

Where to Invest Cash in 2011

Where to park cash today? That is the question for many savers. It’s a pretty tough choice, when interest rates are barely high enough to cover the increase in the cost of living. Keeping all your money in one bank or one product doesn’t provide

via greenbankreport.com

Newly published articles on SavingsAccounts.com, MoneyRates.com, MoneyBluebook.com and GoTalkMoney.com

New articles recently published:

 

@SavingsAccounts.com

– Bank accounts to watch in 2011

 

@MoneyRates.com

– Microfinance sites

– Economic update

– Federal Reserve news

 

@MoneyBlueBook.com

– Banking with an iPhone

 

@GotalkMoney.com

– Protecting your assets from inflation

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Finance, Economic, and Savings Updates/Articles

Content updates / articles posted on MoneyRates.com covering:

– Microfinance

– College Savings

– Green Banking

– U.S. Treasury Report

– Interest Rate Forecasts

– Specialty Banks

– Online Banking Tips

– Commercial Paper

– EverBank CDs

– Indexed CDs

– Money Market Account rates

– Certificate of Deposit rates

– Savings Accounts

– Checking Accounts

– Reward Checking Accounts

– Economic Forecasts

– Government Bond Funds

– Auto Loan Rates

– Inflation-Indexed Mutual Funds

– Federal Reserve News, Data and Forecasts

– Mutual Fund Money Market Rates