With bond yields around 3 percent, many investors seeking income are buying debt rather than equities.  That is a move that should not be made as stocks with high dividend yields are far superior to bonds.  Many of these are well known, such as Microsoft (NASDAQ: MSFT), BP (NYSE: BP), and BHP Billiton (NYSE: BHP).

These companies are as solid as any bond.

Microsoft is a high tech giant that is up nearly 35 percent for the last year of market action.  Big Oil in every way, BP has risen nearly 15 percent for that period.  The world’s largest natural resource company, BHP Billiton has gained more than 9 percent over the last six months.  All are major players, selling goods and services around the world.  As detailed in a previous article on this site, the energy sector is especially rewarding for income investors.

This company strength allows for all to pay dividends that beat bond yields.

With bonds around 3 percent and the average dividend yield from a member of the Standard & Poor’s 500 member under 2 percent, BP offers its shareholders an income stream coming in at 4.74 percent.  The dividend yield for BHP Billiton is 3.61 percent.  For Microsoft, it is 3.20 percent.

In addition to topping the current yields of a bond, these companies also have a history of growing the dividend.

That is not found in a bond.  For long term investors, it is a very appealing feature of BHP BIlliton, BP, and Microsoft.  The five-year dividend growth rate for Microsoft is 14.98 percent.    For BHP Billiton, it is 13.81 percent.  This growth can be expected for the future.

Anything a bond can do, a stock can do better.

That is especially true with generating income for the investors.  Stock with strong dividend histories are much better for the long term than bonds.  BP, BHP Billiton, and Microsoft prove that point.