How Fed Action Helps Dividend-Paying Stocks
Investors who love dividend-paying stocks welcomed news from U.S. Federal Reserve on Wednesday, as Chairman Ben Bernanke said it will continue with its current program of buying and selling bonds in an effort to boost risk assets and drive down interest rates.
After all, the biggest competition to dividend-paying stocks is U.S. Treasury bonds, at least in "Mad Money" host Jim Cramer's opinion. Cramer said Treasury bonds are risk free, but currently pay a small yield. If the Fed raised rates to where Treasurys would yield 4 or 5 percent again, he thinks people would be more likely to sell a stock like AT&T , which yields 4 to 5 percent and is not risk-free.
“Today, though, Bernanke gave us the green light that we won’t be able to get much income from bonds for at least a couple of years, so you should stick with stocks that have good yields because they’ll give you a better return,” Cramer said.
Although some investors hoped the Fed would announce additional measures, Cramer said Bernanke is doing all he can — specifically, keeping interest rates low. He isn't sure the Fed could do much more to spark growth considering the many headwinds facing the U.S. economy today.
"Bernanke can only do so much when faced with Europe, weak housing, and plenty of tax worries," Cramer said.
Read on for Cramer's Top Dividend Stocks
—CNBC.com contributed to this report
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