The Dividend Yield: Stock Mutual Funds and ETFs That Generate Income
by John Markese
Are you looking for an investment that has the potential to produce a growing income stream and long-term capital appreciation along with reasonable risk? Bond funds won’t suffice; their income is a prisoner of prevailing interest rates, and their capital appreciation in the long term is essentially zero, a combination that is exposed to inflation risk.
REITs (real estate investment trusts) come close, but the dividends from REITs do not receive favorable tax treatment as do the dividends from domestic common stocks.
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Convertible bond funds have capital appreciation potential as the stocks underlying the convertibles can appreciate, but the interest stream on convertible bonds does not grow over the long term.
The answer is simple: stock mutual funds and exchange-traded funds (ETFs) with relatively high dividend yields.
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