- High yield dividend stocks are the all the rage in this seemingly endless bull market otherwise starving for higher payouts in a low interest rate environment.
- Where high returns are found also loom equally risky headwinds and questionable underlying fundamentals - just ask the victims of the '80s high yield junk bond bubble.
- “Perhaps this market and its high yield equity opportunities are different,” the perma bulls predictably rejoice.
- But we screened the 345 publicly traded stocks currently yielding 6% or higher and found mostly junk.
The high yield junk bond craze of the 1980s has returned to the current bull market in the form of high yield dividend stocks. And history reminds us how that bubble burst during the stock market crash of 1987.
This time, instead of being used to leverage mergers & acquisitions at the corporate level when available capital was not enough, high yield equities are influencing the propensity for daring risk/reward plays by retail investors or their advisors seeking outsized returns to leverage retirement account balances.
At Main Street Value Investor (MSVI), where quality takes the front seat in all of our equity research, we screened the current high yield dividend stock universe for fundamental strength and found mostly junk.
Here is our argument that high yield dividend stocks are the new equity junk bonds.