Dividend yields exceeding bond yields

[omagh]

Buying of bonds has gotten mindless in the corporate debt markets...Corporate debt markets are pricing in wholesale dividend cuts and deflation across the board OR corporate debt markets are in bubble territory.

http://runningofthebulls.typepad.com/toros_running_of_the_bull/2010/08/the-bond-market-has-lost-its-mind.html

 

Now, if you have been paying attention, you will see that those yields are comparable to the dividend yields on the equities of those same companies.  The following is a comparison between dividend yields and yield-to-maturities of a select group of companies that have issued a significant amount of debt.  The bonds all expire in eight to twelve years.

 

http://runningofthebulls.typepad.com/.a/6a00d83451986b69e20133f2c55ed1970b-popup

The dividend yields of some of the highest quality companies in the world are comparable to or exceed the bond yields of the debt of those same companies.

 

Frankly, that's nuts.

[shalab]

Not really - if you are worried about price volatility. Also, if the company liquidates, bond holders will come first.

[omagh]

Shalab,

 

Let me know when Coke, Chevron, McDonalds, P&G, Merck, Pfizer, etc liquidate.  ;)

 

-O

Not really - if you are worried about price volatility. Also, if the company liquidates, bond holders will come first.