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I got here of age in the course of the Nice Recession, when the Federal Reserve slashed rates of interest to zero and stored them there for nearly a decade. (The Fed cautiously began to boost charges a tiny bit within the late 2010s, solely to slash them again to zero in the course of the pandemic
[1]
.)
So for many of my grownup life, Treasury bonds paid mainly nothing in yield. Should you have been trying to earn passive earnings as an investor, dividend shares have been just about the one sport on the town. Should you’re below the age of ~40, that is most likely true for you, too.
As I write this, the 3-month T-bill yield is round 4.07% and the 5-year observe is getting shut to five%. You possibly can see the yields for different Treasurys and financial savings charges within the desk under:
|
Maturity |
Yield |
|---|---|
|
Financial savings (Nationwide Avg) |
0.37% |
|
2-12 months |
4.82% |
|
10-12 months |
5.19% |
|
30-12 months |
5.52% |
|
Supply: U.S. Treasury, Treasury yields correct as of 10/14/26; FDIC, nationwide financial savings fee as of 9/1/26. |
|
That’s rather a lot increased than we’re used to seeing bond yields. It’s additionally rather a lot increased than fairly just a few dividend yields. The truth is, it’s increased than the overwhelming majority of yields within the Dividend Aristocrats index (a bunch of S&P 500 corporations which have raised their dividend payouts yearly for no less than 25 years).
So in the event you’re in search of a dividend yield that’s increased than present bond yields, you’re most likely taking a look at a dangerous dividend that might be minimize. This raises an fascinating query: Is dividend investing value it on this age of excessive bond yields?
There isn’t a easy reply. Each dividend shares and bonds have some distinctive benefits over one another. We’re breaking it down under.
Dividend shares nonetheless have some benefits
Doubtlessly increased yields. Treasury bonds now pay increased yields than the overwhelming majority of the Dividend Aristocrats, however not all of them.
|
The best-yielding Dividend Aristocrat is Amcor Plc (AMCR), with a dividend yield of 5.92%. |
||||
|---|---|---|---|---|
|
Ticker |
Firm |
Dividend Yield |
||
|
AMCR |
Amcor Plc |
5.92% |
||
|
CLX |
Clorox Co |
5.92% |
||
|
O |
Realty Earnings Corp |
5.86% |
||
|
HRL |
Hormel Meals Corp |
5.74% |
||
|
TROW |
T. Rowe Value Group Inc |
5.05% |
||
|
KMB |
Kimberly-Clark Corp |
4.89% |
||
|
PEP |
PepsiCo Inc |
4.50% |
||
|
Supply: Finviz. Knowledge is present as of Oct. 16, 2026, and is meant for informational functions solely. |
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Should you have a look at a chart of the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) in comparison with the iShares U.S. Treasury Bond ETF (GOVT), this turns into clear:
Extra frequent funds (generally). Treasury bonds and notes pay curiosity semiannually, whereas short-term payments are offered at a reduction to their face worth, which means that you just notice their yield if you money them in at maturity for the face worth
[4]
. That implies that in the event you’re investing in particular person Treasury securities, you’re going to attend no less than three months (the shortest generally marketed Treasury period) between funds.
Many large-cap dividend shares additionally pay out dividends quarterly, semiannually or yearly, however there are some month-to-month dividend shares. (Now we have a web page that tracks the highest-yielding month-to-month dividend shares.)
One caveat right here: Should you’re extra of an ETF investor, it is best to observe that there are ETFs that pay out month-to-month dividends that comprise each dividend shares and bonds. The truth is, our web page on the highest-yielding month-to-month dividend ETFs exhibits a mixture of each.
However Treasurys even have some benefits
Nearly no default threat. Treasurys are broadly thought to be the benchmark for a risk-free funding worldwide. The danger of a default isn’t precisely zero (that’s technically not true of any funding), however Treasurys are backed by the total religion and credit score of the USA authorities, which oversees the most important nationwide financial system on the planet.
A U.S. Treasury default is extraordinarily unlikely, and it’s type of a “large asteroid” state of affairs — if it have been to occur, it could precipitate an unprecedented international monetary and political disaster, and “darn, I ought to have purchased dividend shares as an alternative” would most likely be the least of your worries.
State & native tax exemption. Earnings from Treasurys is taxable on the federal degree, however not on the state and native ranges
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, whereas dividend earnings is taxable in any respect three ranges. That implies that in the event you stay in a high-tax jurisdiction, like I do (New York Metropolis biggest metropolis in da world baybee), the after-tax yields of Treasurys examine much more favorably to these of dividend shares.
Predictability. Should you purchase Treasurys and maintain them to maturity, you might be assured by the U.S. authorities to earn the yield on the time of buy. That dependability could make planning rather a lot simpler, particularly in the event you’re utilizing short-term or mid-term Treasurys as extra of a financial savings car than an funding.
In contrast, dividend shares are a lot much less predictable. Shares are extra unstable than Treasurys. That provides them the potential for larger capital good points, as proven above, but it surely additionally provides them the potential for larger losses when the market will get turbulent.
Neither the writer nor editor owned positions within the aforementioned investments on the time of publication.
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