Why Would You Buy Junk Bonds?

Along the same lines, pipeline giants Enterprise Products Partners (EPD) and Kinder Morgan (KMI) sport dividend yields of 12% and 9%, respectively. Yes, they are in the business of moving oil and gas, and yes, that business may be in rough shape if we see a wave of energy bankruptcies sweep America. There is a risk that cash distributions get cut slightly. Some of the weaker players in this space have already cut to conserve cash.

But again, would you rather own a high-quality pipeline operator with decades of experience and massive insider ownership, or a portfolio of bonds issued by crappy companies?

Even Altria Group (MO), the maker of Marlboro cigarettes and other tobacco products, yields around 10%. Would you rather own one of the oldest and most reliable dividend payers in history, or a portfolio of bonds issued by crappy companies?

I could go on all day, and I’m not necessarily suggesting you run out and dump a ton of money into any of these stocks. But my point stands. Given the dividend yields on offer across the market right now, putting together a portfolio of high-quality dividend payers makes a lot more sense than junk bonds. Once this crisis passes – and it will, even if it takes months – the dividend stocks are a lot more likely to provide a solid stream of income in retirement.

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Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not ...

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