While interest rates on bonds have risen slightly from the absolute bottoms, investors looking for income are still not satisfied with the rates that they can get today. Adding to their concerns is the expectation that when the federal reserve slows “quantitive easing” interest rates will rise to significantly higher levels. And that means that the bond they buy today will probably go down in value.
As a result, income investors are actually looking at dividend paying stocks to provide the cash flow that they need. One other advantage of this strategy is that many companies have been raising their dividends regularly, something that bonds don’t do.