Drive Through For a Safe Yield

I hear from people every day that are frustrated by the minimal yields that are currently offered by savings accounts and even certificates of deposits (cd’s). These individuals are saving diligently, but can’t seem to find a decent return on those savings.

 

Many individuals have been burned by the stock market in recent years and aren’t interested in seeing their portfolio’s decimated once again. The market declines this month have only reinforced that fact.

 

So should prudent savers just settle for the minimal returns offered by banks and credit unions?

 

Unfortunately, Yahoo Finance reported that average savings rates now stand at only 0.2%. Meanwhile, the inflation rate over the last year has been 2.2%. Individuals that simply stashed all of their money in savings accounts would have earned a negative return over the last year (after considering the effects of inflation).

 

While savings accounts are safe (at least up to the FDIC limit), they clearly are not going to provide you with an attractive yield.

 

Many financial advisors are now pushing gold as the investment of choice. However, despite what you may hear, gold prices do not always go up. To properly diversify, gold should not comprise more than 20% of your total portfolio.

 

Investors looking for higher yields should not write off dividend stocks. While the broader stock market plunged heavily in 2007-2008, there where some stand-out dividend stocks that posted positive returns even in the midst of that recession.

 

One star performer of the Great Recession was fast food chain, McDonalds [[MCD]]. While the S&P 500 plunged over 38% in 2008, McDonald’s stock posted a 5.6% gain. In fact, McDonald’s is the only stock in the Dow Jones index to post a gain every year since 2006.

 

McDonald’s doesn’t typically see blockbuster gains in their stock price and will never be confused with a high-growth stock like Apple [[APPL]] or Google [[GOOG]]. However, the stock has been a safe haven for investors during the tumultuous times.

 

McDonald’s also pays a regular dividend each quarter, which results in investors receiving an annual yield of 3.2%. While there are more speculative stocks out there paying higher yields, 3.2% is very impressive for a safe stock like McDonald’s. And it is certainly much better than the 0.2% yield you will get from your savings account.

 

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There is one response to Drive Through For a Safe Yield

  1. Three Top Dow Dividend Stocks | Stocks and Dollars:
    June 16th, 2010 at 9:14 am

    […] McDonald’s has been our top Dow dividend stock pick this year. We believe that MCD is the safest Dow dividend stock and still yields an impressive 3.4%. Like Dupont, investors can count on more than just dividend […]

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