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Special Report

Morningstar's Guide to Dividend and Income Investing

This week we explore the role of income-producing securities in a portfolio and share some of our analysts' best ideas.

It seems almost unthinkable: A little more than a decade ago, in 2007, FDIC-insured cash investments were paying almost 5%. Fast forward a decade--and a financial crisis--later, and investors find themselves cheering that yields have topped 1.5%. Seemingly every rock has been turned over in search of income.

Of course, yield has been a crucial component of stock and especially bond investors' returns over time: With the Federal Reserve poised to continue to boost interest rates and return potential of stocks constrained by high valuations, a portfolio's income production is apt to be an even bigger driver of returns in the future than has been the case in recent decades. Yet the fact that investors have been so income-starved for so long makes it especially important to be discerning when incorporating yield-producing securities into your portfolio.

All this week, we'll be exploring the role of income-producing securities in a portfolio, and sharing some of our analysts' best ideas in the yield patch. We'll start with a broad overview of income-producing strategies: tax implications, how best to extract retirement income from a portfolio, and mistakes to avoid when you're on the hunt for income. Then, we'll take a closer look at various types of income-producing securities, and this is where the picks come in. We'll discuss our favorite stocks and funds with above-market dividend yields, as well as stock and fund picks that fall into the dividend-growth camp. Later in the week we'll give bonds their due, focusing on taxable and municipal bonds on successive days. On each of those days, we'll also discuss some of the key pitfalls to watch out for.

Tune in throughout the week for concrete picks and strategies.

Monday, March 19: Nuts and Bolts

How to Extract Income from a Retirement Portfolio
We compare different strategies for generating cash flows, from pure total return to income-centric approaches to annuities.

Income-Seekers: 4 Mistakes to Avoid
Low bond yields and the prospect of rising rates have the potential to trip up yield-focused stock and bond investors.

How Your Investment Income Is Taxed
A quick rundown of how the income produced by different investment types is treated at tax time.

Our Best Dividend-Stock Ideas
We think Enbridge, P&G, Duke Energy, and Restaurant Brands offer durable dividends at good prices.

Tuesday, March 20: Dividend Yield Stocks

Our Favorite High(er)-Yielding Equity Funds and ETFs
These active and index funds/ETFs offer decent yields and don't take crazy risks.

What's the Difference Between Dividend Yield and Dividend Growth Stocks?
Whether you're in the market for a company paying a juicy yield or one that's growing its payout, here are some things to keep in mind.

3 High-Quality Dividend-Payers Selling at a Discount
We highlight the cheapest stocks among the 14 new entrants to the Morningstar Dividend Yield Focus Index.

Wednesday, March 21: Dividend Growth Stocks

Our Favorite Dividend-Growth Funds and ETFs
While their yields aren't especially high, these funds look good from the bottom up. 

10 Cheap Stocks Set to Grow Their Dividends
Cash-rich businesses with sustainable and growing yields don't often go on sale, but we found 10 bargain stocks in the Morningstar US Dividend Growth Index.

What a Dividend Payout Ratio Can (and Can't) Tell You
A high payout ratio could be a red flag, but it doesn't always portend a dividend cut. 

Thursday, March 22: Taxable Fixed Income

What Higher Rates, Inflation Could Mean for Bond Investors
Morningstar's Sarah Bush explains how investors should think about the current fixed-income landscape.

Standout Taxable-Bond Funds
Here are some of Morningstar's favorite taxable-bond funds across high- and low-quality, U.S. and foreign.

An Overview of the Passive Bond Funds Landscape
Alex Bryan offers his favorite passively managed core funds and ETFs.

Individual Bonds: The Answer for Rising Rates?
Individual bonds can be held to maturity but have a few key drawbacks, too. 

A Checklist for Taxable-Bond-Fund Investors
Five considerations for those investing in fixed-income funds.

Friday, March 23: Tax-Free Fixed Income

Excellent Municipal-Bond Funds
Here are some of Morningstar’s favorite muni funds across various maturities and quality ranges.

Interest Rates, Tax Changes, and the Muni-Bond Market
Morningstar's Beth Foos discusses today's municipal-bond landscape and the rise of passive muni funds.

A Checklist for Muni Bond Investors
Six considerations for those considering an investment in municipal bonds.