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Summary
- High-yield investments come with enormous risks.
- And even investors looking strictly at income have much better alternatives.
- Is Verizon Communications Inc. a value trap, and what type of dividend stocks perform the best for income investors?
Friends, Romans, countrymen, lend me your ears;
I come to bury Caesar, not to praise him.
-William Shakespeare, from Julius Caesar.
High Yield
In this case, “Caesar” represents many high-yield investments.
High-yield investments get a lot of play on Seeking Alpha and many other investing sites. After all, it’s an easy sell. On the surface, who wouldn’t choose a 10% yield over a 2% yield? Add to this the claim that the goal isn’t to beat the market, and voilà!
But it isn’t that simple.
High yields often come with a price, such as:
- Erosion of principal;
- Risk associated with leverage;
- High-risk equities;
- Dividend cuts; and
- Opportunity cost.
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