With interest rates rising, bonds are becoming more attractive due to higher yields.
Investors should not be swayed by that as anything that a bond can do, a stock that pays a dividend can do much, much better. That is especially true for Dividend Aristocrat stocks such as Coca-Cola (NYSE: KO), Exxon Mobil (NYSE: XOM), and Wal-Mart (NYSE: WMT). To earn the title of a Dividend Aristocrat, a company must have increased its dividend annually for at least 25 years.
That is something an investor will never experience from a bond.
What will also not be enjoyed in the rise in the value of the bond. That can happen, but nothing like the increase the share price of a stock. For 2013, Coca-Cola is up more than 16%. Over the same period, Exxon Mobil has increased by nearly 20%. For the last year, Wal-Mart has gained almost 20% in share value, too.
The dividend yield tops what would be earned from the debt of a company of a similar value.
Wal-Mart pays a dividend of about 2.40%. For Coca-Cola, the dividend is 2.73%. It is more than 2.50% for Exxon Mobil.
Those yields exceed what a bond would pay with a similar rating.
There are some who feel that bonds are more stable. But that is hardly the case with a Dividend Aristocrat stock such as Exxon Mobil, Coca-Cola, or Wal-Mart. These companies are so solid that each is a major holding of legendary investor Warren Buffett. That makes the appeal even more alluring than that for a bond.