Intel Corporation (INTC), AT&T Inc. (T): Should Long-Term Investors Go for Dividends or Blue-Chip Bonds?

So what’s an investor to do?
These stocks offer higher yields than 10-year treasuries and good prospects for the dividend payouts to be raised over time. They also carry the risk — for these five, very slight — that the dividends will be cut or eliminated, because the companies are under no obligation to continue paying dividends. Of course, the stock price will move along with the market, business prospects, and news.

The bonds are a known quantity. Barring the unlikely case of default, an investor in one of these bonds will receive a constant coupon payment and return of the bond’s face value at maturity. Note that four of the five bonds trade at a premium, meaning the current market price is above the bonds’ face value. Four of the five are also callable, meaning the company can redeem them before maturity. Call prices are typically a premium to face value, but not necessarily market value.

My crystal ball isn’t clear enough to say for certain whether stocks or bonds are a better investment right now. I can tell you that I’m an income-oriented investor and that in three of the five cases listed, my money is literally riding on the stocks. Even with the recent climb in bond interest rates, there’s still a strong case for quality dividend stocks to be core holdings in a portfolio designed for income.

The article Should Long-Term Investors Go for Dividends or Blue-Chip Bonds? originally appeared on Fool.com and is written by Russ Krull.

Russ Krull owns shares of AT&T Inc. (NYSE:T), McDonald’s, and Intel Corporation (NASDAQ:INTC) but has no positions in any of the bonds mentioned. The Motley Fool recommends Intel, Johnson & Johnson, and McDonald’s. The Motley Fool owns shares of Intel, Johnson & Johnson, and McDonald’s.

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