For investors on the hunt for income, high-quality stocks are the “best bet,” said Hersh Cohen, chief investment officer of ClearBridge Advisors.
“I think one of the great stories of the last couple years is that you could get better yields on the overall market than you could on stocks,” Cohen said. “Now, you can still get better yields on a package of high-quality equities that are materially higher — from 2.5 to 5 or 6 percent yields on good quality stocks — and I think as long as that’s the case, stocks are good.”
Companies are continuing to raise their dividends actively while stocks are still not expensive, he said. Stocks will remain a “win-win” until they become too expensive.
“I think that companies are under enormous pressure to increase dividends,” he said. “We’ve seen in the first couple months of this year above-average levels of dividend increases from companies, so I think the story is a good one.”
The Federal Reserve’s announcement that it plans to keep interest rates low rates near zero until at least late 2014 despite an apparent improvement in the economy is forcing people off the sidelines and into the market, he added.
Cohen’s stock picks include 3M, Wal-Mart Stores, Microsoft, and Chevron.
His company also owns shares of JPMorgan Chase, Wells Fargo, and Travelers Cos.
“There are some stocks that are down and out that we find interesting, lower-priced stocks — Staples, Xerox — things that have been sort of busted out that have big long bases on them that are interesting,” he said.
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Disclosure was unavailable for Hersh Cohen’s, but his company owns shares of JPMorgan, Wells Fargo, and Travelers.
Follow Katie Little on Twitter @katie_little.