Where Do I Invest Money When Interest Rates are So Low?

My mother is retired and is doing her best to live off of her retirement savings and Social Security payments.  She prefers to invest in conservative CDs and bonds as she doesn't have a lot of money and doesn't want to risk losing money.  However, the rates are so low today she is wondering what to do.  CDs are earning a measly 1.5% to 2.5% depending on duration.  Corporate bonds aren't much better.

The April 2009 issue of Kiplinger's Finance has some good alternatives for those willing to put some money in stocks that pay decent dividends.  While investing in stocks certainly has downside exposure as we've all experienced recently, if you are investing for the long haul, consider some of the following:

  • Altria (Symbol: MO) at its current price of $17 generates a 7.9% yield (I don't like smoking but I don't mind profiting from those who do).
  • BP plc (BP) at $38 has an 8.8% yield! Nice!
  • Aflac (AFL) at $15 has a yield of 7.5% (though the stock price has been completely hammered down 80% over the past year...not for the faint of heart)
  • Eli Lilly (LLY) at $31 has a yield of 6.5%
  • GlaxoSmithKline (GSK) at $29 yields 6.8%
  • Nicor (GAS) at $29 has a yield of 6.4%
  • Merck (MRK) at $27 (was $24 yesterday) yields 6.3%
  • H.J. Heinz (HNZ) at $33 yields 5.1% - ketchup on some nice dividends!
  • Kraft Foods (KFT) at $23 yields 5.2%
  • Coca-Cola (KO) at $41 yields 4%

Other stocks that I like for their dividends and what I believe to be are solid future prospects are:

  • AT&T (T) at $24 a share yields 6.7%
  • Verizon (VZ) $28 yields 6.8%
  • Southern Co. (SO) at its current low point of $27 yields 6.3%
  • Johnson & Johnson (JNJ) today is at $51 and yields 3.8%
  • Kimberly-Clark (KMB) of Kleenex, Huggies and Depends fame at $46 yields 5.3%
  • Microsoft (MSFT) at its current low price of $17/share yields 3.1%
  • Bristol-Myers Squibb (BMY) at its current $21 price yields 6%
  • Even Procter & Gamble (PG) at $47 is now yielding 3.5%
  • I also like the iShares Investment Grade Corporate Bond ETF (LQD) which invests in high yielding corporate bonds and currently yields 5.8%

These yields look good now but things can change...both dividend payments and stock prices can drop (case in point...GE and all the financial stocks).  But stock prices have already dropped so much that I'm willing to take my chances on many of these.