Navigating the Yield / Growth Trade-Off

Sometimes, I think the world has lost a lot since the good old days, when an income investor could simply pick up a few high-grade corporate bonds and some utility stocks and call it a day. It’s so easy for such investors to articulate a goal: Income. How hard was that? Unfortunately, implementation in the modern era can be a nightmare. For one thing, interest rates remain ridiculously low. Commentators speak of this as an unconditional blessing, but such notions are hogwash to suppliers of capital; i.e. those who see interest as an income item rather than an expense. Even so, high single-digit and even double-digit yields can be found. But these tend to be surrounded by so many dire warnings as to almost make smoking seem blasé. Then, too, we have the financial preachers who extoll the virtues of dividend growth so much as to almost make income-seekers feel guilty if they aren’t loading up on stocks like Microsoft (MSFT) or Wal-Mart (WMT), with yields of 2.5% and 2.8% respectively.... Read more