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Fund Spy

What to Consider When Buying a Dividend Stock Fund

They are attractive, but investors should pay heed to more than yield.

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With the Morningstar U.S. Corporate Bond Index’s yield to maturity at 2.18% as of September 2021, and long-term inflation expectations ranging from 2.4% to 2.5%, bonds are not very appealing. In the short run, they can also hurt if interest rates surge. When the 10-Year Treasury yield more than tripled to its recent high of 1.74% between August 2020 and March 2021, the Morningstar U.S. Corporate Bond Index lost 4.1%, while the Morningstar U.S. Large-Mid Index gained 20.5%. Although bond investors can make some of that money back when they invest at higher rates, their long-term prospects are still meager.

Alec Lucas does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.