Flee from the Detroit Bankruptcy to the Safety of Dividend Stocks

In times of turmoil, "safe haven" assets always increase in value.

Some view gold and silver as safe haven assets, for whatever reason. Savvy investors, especially after the Detroit bankruptcy, utilized dividend-paying stocks such as McDonald's MCD, Coca-Cola KO, and ConocoPhillips COP as safe havens for capital.

In previous articles on Benzinga, it's been pointed out why dividend stocks are far superior to municipal bonds.

Those same factors result in dividend stocks being ideal safe haven holdings. To pay a dividend, a company such a McDonald's or Coca-Cola must generate the earnings to finance the payout. The management of ConocoPhillips and others who pay dividends must feel, in accordance with their fiduciary duty to maximize shareholder value, that there is no better usage of the funds.

All of that, especially when a company increases its dividend, should be of great comfort to investors.

That is something not being felt by those owning Detroit municipal, right about now. Not only are the income payments not being received but the main reason to buy a bond for many, the principal for the securities, will most likely be slashed in value, too. As for prospering from the increasing payouts that result from dividends growth from owning shares of ConocoPhillips, Coca-Cola, and McDonald's, that is not going to happen.

What should also appeal to investors is that McDonald's, ConocoPhillips, Coca-Cola and other blue chips benefit from global growth. That is what investing is all about: prospering from consumers who have made a decision in the free market to purchase the goods and service of a company as it best satisfies their need at that time.

Gold and silver are bought by those who believe that economies will crash, resulting in paper money losing value.

Who wants invest to prosper from such a morbid outlook when many other ways offer profits from improving economic conditions around the world?

Plain and simple, anything a bond can do, a stock can do much, much better. Publicly-traded companies with dividends that have a history of growing are far superior to bonds. In addition, the dividend yields of blue chip companies far exceed those of bonds of similar quality: the dividend yield for ConocoPhillips is 3.98 percent, it is 3.43 percent for McDonald's and 2.85 percent for Coca-Cola.