- "Forget the bond market. If you want income, you need to find it in stocks," CNBC's Jim Cramer said.
- "As a general rule, if you see a stock with a yield north of 8%, that means the smart money won't go near it," the "Mad Money" host said.
- "With my diversified dividend portfolio, you can get a 5% plus yield with the possibility of actual upside," he said.
With bond yields and interest rates expected to remain at historically low levels for as long as the eye can see, the best arena for investors to find income is in the stock market, CNBC's Jim Cramer said.
"Forget the bond market. If you want income, you need to find it in stocks," he told "Mad Money" viewers Tuesday. "I've decided tonight to put together a diversified portfolio of high-yielding stocks that I trust that also offer some potential for upside, because I want you to know that it's still possible to get income with a degree of safety in this environment."
Dividend stocks classify companies that share a portion of their profits with investors on a periodic basis, distributed in the form of cash and sometimes in additional shares.
"With my diversified dividend portfolio, you can get a 5% plus yield with the possibility of actual upside," Cramer said. "If you want income, that's a much better deal than you'll get from CDs or Treasurys."
Cramer's dividend stocks for this environment:
- Dow, 5.02% yield
- IBM, 5.17% yield
- AbbVie, 4.88% yield
- B&G Foods, 7.11% yield
- Chevron, 5.93% yield
- Verizon, 4.28% yield
- American Electric Power, 3.64% yield
- Dominion Energy 3.45% yield
- Entergy 3.93% yield
As part of Cramer's philosophy on dividend portfolios, investors should resist taking on too much risk when seeking stocks with dividend yields. Stocks that yield more than 8% are red flags, he said, warning that high yields can be cut or the stock price could be on a decline.
Cramer said a stock with a 4% yield is ideal.
"As a general rule, if you see a stock with a yield north of 8%, that means the smart money won't go near it," he said. "It tells you that there's a lot of risk, and if you're investing for income, risk is the last thing you want."
Companies distribute dividends to shareholders as a reward for owning the stock. The payout, which can be scheduled monthly, quarterly or annually, is determined by a company's board of directors and serves as an income stream.
Some mutual funds and exchange-traded funds also offer dividends to shareholders. Many new and fast-growing technology companies, including Amazon and Tesla, often re-invest full profits back in the company, in lieu of dividend payments, as a way to charge growth and expansion, often accompanied by a surging stock price.
Disclosure: Cramer's charitable trust owns shares of Amazon.