Weekend: How to Beat Bernanke's War on Savers

Brian Hicks

Updated July 10, 2011

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

There is no other way to put this because it is true: Ben Bernanke hates savers.


With his zero interest rate policy (ZIRP), he has virtually declared war on each and every one of them.

In his efforts to push asset prices higher, Ben believes savers should actually be pushed from the nest into the world of stocks. After all, in Ben’s world, the safety of money in the bank earning a reasonable interest rate is a dangerous thing…

That’s why folks with savings have been virtually forced out into the markets these days in a search for higher yields.

Ben knows those 1.25 % savings account and CD rates simply won’t cut it.

The result is that high-paying dividend stocks have been among the best performers in the market since this disaster began.

In fact I have been emphatically recommending dividend stocks to my Wealth Advisory subscribers for some time now as a relatively safe way to build wealth while earning a decent yield.

Those subscribers have been rewarded with a dividend portfolio that’s a perfect 9-0, with net gains of 329% over the last three years. Not bad for a bear market…

Because as every successful dividend player knows, income investing lets you win two ways: first, with a cash payout; second, through the price appreciation of the underlying stock.

This allows savers and investors alike to earn the double bonus in their search for better yields.

However, picking successful dividend-paying stocks is not as simple as buying the stocks with the highest yield. In fact the stocks with the highest yields are often the ones that trip investors up the most.

Picking winning dividend stocks usually requires finding candidates with two qualities:

  1. They should have a minimal risk of a dividend cut.
  2. There should be a high probability that the dividends will increase while you own the stock.

With those criteria in mind, here are four stocks worthy of any retirement portfolio:

  • Abbott Laboratories (NYSE: ABT): A diversified health care company, this is a stock you can safely add anytime on weakness. The 3.6% current yield is well above average for this type of company, and the 62% payout ratio suggests future sustainability. What’s more, ABT has increased its dividend payouts for 39 straight years. With a forward P/E of 10.71, this is potentially a $63.00 stock.
  • McDonald’s Corporation (NYSE: MCD): I can’t say I’m a big fan of their food, but it’s hard to deny MCD is one well-run global machine. Recession or not, food is always moving out of the Golden Arches. The burger behemoth has raised its dividend for 34 years in a row while producing a ten-year annual dividend growth rate of 26.50%. The yield isn’t off the charts at 2.80%, but this one promises steady returns.
  • Realty Income Corporation (NYSE: O): This is one of my all-time favorites. Realty Income has one of the best business models to speak of and pays a 5% yield. The dividend is supported by the cash flow from over 2,500 properties owned under long-term triple-net lease agreements. To date, the company has paid 492 consecutive monthly dividends while raising the payouts 62 times since 1994.
  • Duke Energy Corp. (NYSE: DUK): An energy/utility company, Duke Energy delivers power to four million customers in the Carolinas and parts of the Midwest. The company pays a 5.4% dividend yield and has increased its quarterly distribution for seven consecutive years.

So don’t let the Fed’s war on savings keep you from earning the yields you deserve. The right mix of safe, high-yielding dividend stocks can help replace what the Fed has taken away.

As for some other places to start building a lifetime of wealth, our editors have put together a few of their best ideas for the years to come in this week’s top-read articles from Wealth Daily and Energy & Capital, below.

Have a great weekend.

Your bargain-hunting analyst,

 steve sig

Steve Christ
Editor, Wealth Daily

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