Benzinga - Fed Chair Jerome Powell confirmed in his testimony to Congress Tuesday and Wednesday the Federal Reserve is prepared to raise interest rates above 5% to combat inflation.
As a result, the two-year treasury yield has reached a 15-year-high, hitting nearly 5% Wednesday. This means that you can buy virtually risk-free bonds that will give you an annual payout of 5% return on invested capital. In a macro environment where stock returns are uncertain, these T-bills become more attractive to investors.
It’s important to note that your return on dividend stocks will also be dependent on the performance of the stock, whereas the T-bills are virtually guaranteed to pay you out the yield advertised. The current two-year bonds will give you a higher yield than these major dividend players:
Johnson & Johnson (NYSE: JNJ) is a massive, $400-billion company that specializes in medical and pharmaceutical equipment. From baby powder to COVID-19 vaccines, J&J does it all (well, basically). The stock currently pays about a 2.9% annual dividend yield, according to Benzinga Pro.
Lowe’s Companies Inc (NYSE: LOW) is one of America’s largest home improvement stores, selling building materials for construction and do-it-yourself projects. The company is worth about $120 billion in market cap. Lowe’s currently pays a dividend yield of about 2.1% according to Benzinga Pro.
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Eli Lilly and Co (NYSE: LLY) is a $300-billion pharmaceutical company focused on various areas of biotechnology. Its proprietary drug tirzepatide has been making rounds on social media recently for its ability to help people lose weight. Eli Lilly and Co pays a dividend of about 1.45% according to Benzinga Pro.
Walmart Inc (NYSE: WMT) OK, do I really need to describe what Walmart does? They sell things. A LOT of things. Enough things that the company is worth $372 billion dollars. Is anyone else surprised J&J’s market cap is larger than Walmart? Ok, back to the point, we’re talking about dividends.
Walmart pays an annual dividend of about 1.65%, according to Benzinga Pro. So, assuming the prices of these stocks remain constant (they won’t) the 2-year yield may give you a higher return than these classic, blue-blood American dividend stocks. The question becomes, do you think these stock prices will go up or down? If you think there’s still a lot of risk out there with stocks, then T-bills might be your best bet.
If interested in buying treasury bills, click here for more information.
Now Read: Dividend Yields 101: How To Calculate And Use For Your Investment Strategy
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