Investing 102

[BC69]

The calculation you left out of this is TAX RATE Differential.... Corporate Bonds are ordinary income tax rate.... Dividends are max tax (right now) at 15%

Makes a HUGE difference in the yield.

Ah, good point. Still in the 4% vs. 7%. $1000 Investment. $40 for dividends ($34 after tax). Or $70 ($47 after 32% rate). I can see the shorter maturity bond being negated by the taxes, but still have security factor.

But totally right, if this is an investment account and you take that out to use yearly, taxes impact. If its a long term account, ROTH 401k or IRA, taxes will be a mute point.

What made me think of this was that my old boss, his father in law lived off of dividends from his old company (a large cap industrial mature business), and in 2009 they cut the dividend to conserve capital. Had a huge impact on guys like that, massive! Bond holders kept their income.

Also, another lesson in diversification right.