Rising Rates, Now Only A Few DJIA Stocks Out-Yield Longer Treasuries (TBT, KFT, MRK, PFE, T, VZ)

Banking, finance, and taxes

Published: December 16, 2010 11:01 am

Last Updated: April 3, 2020 3:58 pm

The longer-end of the curve is is still rising. Earlier we had seen the highest yields since June, and now we are seeing the highest yields since May. The 10-Year Treasury yield has broken the 3.50% barrier and is up at 3.54%, while the 30-Year Treasury Long Bond yield is now up at 4.60%. As yields keep rising, the ProShares UltraShort 20+ Year Treasury (NYSE: TBT) keeps rising as it is double-short the Barclays Capital 20+ Year U.S. Treasury Bond Index.

It was just back in August when we sounded the alerts that 20 of 30 DJIA stocks had higher payouts than the 10-Year Treasury, and 8 of the 30 DJIA components had a higher yield than the 30-Year long bond. While there are still some out-yielding the 10-year Treasury and the Long Bond, the list has shrunk considerably.

We now have only 5 of the 30 DJIA components with a higher dividend yield than the 10-Year Treasury and we have only two yielding more than the long bond:

Kraft Foods Inc. (NYSE: KFT) at $31.41 yields roughly 3.70% with its $1.16 annualized payout. Merck & Co. Inc. (NYSE: MRK) at $36.66 yields roughly 4.20% with its $1.52 annualized payout. Pfizer Inc. (NYSE: PFE) at $17.08 yields roughly 4.20% with its $0.72 annualized dividend but that is about to be higher at $0.80 per year and that new yield comes to almost 4.7%.

The only two which already yield more than the long bond are AT&T, Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ). AT&T at $29.17 and the annualized $1.68 dividend comes to 5.7% for a dividend yield. Verizon is at $34.58 and the $1.95 annualized payout comes to 5.6% for a dividend yield.

If longer-dated Treasury yields rise too much, they will become real competition for income-oriented investors.

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JON C. OGG

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