Steady Income from Volatile Sources
Sudden sell-offs can be scary, but the income side of income investing delivers reliably.

Even investors who emphasize a flow of spendable cash and don't trade much tell me they hate volatile prices for their income-oriented securities. I'm with you, because I also dislike seeing sudden and scary sell-offs in yield-centric portfolio staples such as real estate investment trusts, oil-and-gas partnerships and dividend stocks. But the top priority for income seekers should be maximum assurance that interest and dividends will arrive in full and on time. And fortunately, despite the volatile market action of late, the income side of income investing (stock dividends and bond interest payments) remains reliable.
Dividend cuts and debt defaults are largely limited to cases of fraud or mismanagement. Bonds have regained some of the value they lost earlier in the year as medium- and long-term interest rates–notably the yield on 10-year Treasuries–have retreated amid renewed heavy demand, including by individuals pouring money into fixed-income mutual funds and exchange-traded funds. (Prices and yields move in opposite directions.) It's true that certain income investments look crazy expensive. Boeing (symbol BA, $339, yield 2%) has raised dividends 88% since 2015 to become as much a primo cash cow as a (now) high-flying industrial stock. That's helped double the price of the shares since then and sent the price-earnings ratio to nearly 25 times estimated earnings for the next 12 months. (Prices, yields and other data in this column are through April 20.)
Look beyond price. However, the price of the stock isn't always as important as the timely payment of interest and dividends. And that service is not suffering at all from the wild and woolly behavior of share prices.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Here's an analogy: When a Boeing 767 takes off from New York City for San Francisco, the travelers might have paid anywhere from roughly $120 to $1,200 for their tickets. Yet all expect to arrive safely and at the same time (whether on schedule or late). Similarly, when Boeing pays close to $1 billion to its stockholders in March, June, September and December, some payees will have an average cost of $75 a share, for others it will be $175, and for a handful it will be more than the current share price. But everyone will get the same $1.71-per-share dividend.
Although Boeing might not always be able to raise dividends by leaps and bounds–and its price is at risk on any given day due to fears of escalating trade tensions–I urge you to stay aboard for the high and safe income. Among other virtues, Boeing generates $11.7 billion of free cash flow annually–enough to cover its $3.4 billion dividend tab several times over.
Boeing is but one example among many. The same rationale applies to AT&T (T, $35, 5.8%) and Verizon (VZ, $48, 4.9%), which pay out a combined $21 billion a year. Both companies can easily afford it, and the stocks are obvious keepers. Their shares have been up and down (mostly down of late), but that has no effect on the safety and constancy of the dividend payments. (For more income investing ideas, see Earn Up to 11%.)
All told, in a messy first quarter, 948 U.S. companies raised dividends, with an average hike of 7.6% from the first quarter of 2017. There were just 167 cuts or suspensions.
Most bond strategists I talk to don't believe that wild trading imperils your coupon payments, either. Robert Tipp, of the Prudential Insurance Company's massive bond-investment arm, is advising clients to stay the course as "a lot of this noise blows over." If you study the charts and the indexes, stock and bond prices are largely where they began this year, despite the occasional huge drops in the Dow Jones industrial average. Buying on the dips still makes sense. In March, REITs and utilities recovered much of what they lost in January and February. So for now, continue cashing your checks, hold on to what pays on schedule, and enjoy your summer.
-
-
What Is a Stock Split, and Why It Matters to You
A stock split can indicate that a company is healthy — but don't fall for the hype.
By Charles Lewis Sizemore, CFA • Published
-
Stock Market Today: Stocks Rally on Debt Ceiling News, Manufacturing Data
A slow start turned into a strong finish for stocks thanks to encouraging debt ceiling updates and the latest economic data.
By Karee Venema • Published
-
3 Bond Funds to Build on a Summer Rally
bonds The market expects consistently lower inflation to arrive sooner rather than later. That's great news for these three bond funds.
By Jeffrey R. Kosnett • Published
-
Stock Market Today: Energy Sector Drags on Stocks
Stock Market Today The latest economic data showed slowdowns in both factory activity and construction spending.
By Karee Venema • Published
-
Income-Investing Picks for a Recession
Investing for Income Some consequences of an economic downturn work to the benefit of fixed-income investors. Here are three fund ideas that fit the bill.
By Jeffrey R. Kosnett • Published
-
Stock Market Today: Stocks End Lower Ahead of Major Inflation Update
Stock Market Today Energy was the worst-performing sector as U.S. crude futures sold off on worries over slowing oil demand.
By Karee Venema • Published
-
Dogs of the Dow Are 2022's Best in Show
dividend stocks Some of the best investments for income investors in a volatile 2022 have come from the Dogs of the Dow.
By Jeffrey R. Kosnett • Published
-
Stock Market Today: Fed Goes Big, Wall Street Approves
Stock Market Today The Fed's largest rate hike in nearly three decades, and more flexibility from Chair Powell, squeezed stocks higher Wednesday.
By Kyle Woodley • Published
-
Bond Values in a Volatile Market
Investing for Income While the market's instability may not be over just yet, the latter half of the year should be less daunting – and possibly more rewarding – for investors.
By Jeffrey R. Kosnett • Published
-
Stock Market Today: Microsoft Delivers, Alphabet Disappoints in Flat Day for Stocks
Stock Market Today The Nasdaq touched a new intraday low but finished near breakeven Wednesday as two of its biggest components reported earnings.
By Kyle Woodley • Published