While the 10-year U.S. Treasury Note continues to languish in a sea of global uncertainty, all while short-term interest rates remain at dangerously record-low levels, more than 200 U.S. listed securities are paying more than the measly 2.40% yield offered by the U.S. 10-year Note. In fact, just as this article was being published, the 10-year is now yielding only 2.23% after recently hitting 2.13%.
What does that mean?
Even bond managers aren’t buying bonds for their own accounts. I can guarantee you they’re buying stocks; solid names with nice dividend yields.
The problem is of course, the differential between risk and reward. Despite the recent downgrade of U.S. debt by Standards & Poor’s, the fact remains that U.S. Treasury securities remain by far the safest investments in the world.
Don’t listen to the naysayers out there. These individuals are all over the media. They are either gold bugs or lifelong conspiracy whack jobs.
U.S. Treasuries remain as the global standard for risk-free returns. Anyone who does not understand this fact simply has no idea what’s going on.
In short, much of the riskless characteristic of U.S. Treasury securities is directly related to the dollar-oil link, which I have discussed on numerous occasions dating back to the original 2006 release of America’s Financial Apocalypse.
Certainly there are other contributors to the safety of U.S. debt, such as its capital markets, military power and world trade. But the primary factor related to the inherent safety of U.S. Treasury securities can be most easily seen by consideration of the dollar-oil link.
Thus, the question arises…
If there are more than 200 U.S. securities paying dividend yields above the 10-year Note, what is the relative risk of each?
We have addressed this question in Dividend Gems. While we do not cover 200 securities in this publication, we have compiled a list of our best securities from a risk-reward perspective. In fact, currently, the average security on our Dividend Gems list has an annual dividend yield of 5.10%, or more than 200% higher than the U.S. 10-year Note.
Notably, just a few months ago prior to the series of market corrections (which by the way we predicted with stunning timing and accuracy), the average dividend yield of the Dividend Gems recommended list was an eye-popping 5.7%.
At that time, the average dividend yield of the S&P 500 index was a mere 1.59%.
Today, the average dividend yield of the S&P 500 Index has increased to 2.00%.
How do we interpret this?
It’s simple. Since that time, the S&P 500 Index has collapsed, causing the yield to rise.
But wait a minute. How is it that the dividend yield of the Dividend Gems recommended list declined over the same time span?
This too has a simple explanation.
The securities in the Dividend Gems recommended list DID NOT DECLINE BY NEARLY THE SAME AMOUNT as the S&P 500 Index.
What does that imply?
It means we have accomplished the impossible. We have identified securities with very low risk with a dividend yield of more than 350% of that offered by the S&P 500 and more than 250% more than the yield on the 10-year Note. And because these securities significantly outperformed the S&P 500 during the series of market corrections, they are very low risk.
We are in the process of compiling the recent performance of Dividend Gems. In the past, we have shown how well it has outperformed the S&P 500 Index. Now we are going to show you how it fared during the last market correction. Stay tuned.