Forget C.D.’s, These Stocks Get Real Returns

Anyone that is investing in Certificate of Deposits (C.D.’s) can tell you that the returns are horrible right now. Banks are currently offering less than 1% to 1.5% depending on the C.D. maturity date. This rate of return is not even keeping up with inflation so your actually losing real purchasing power.

I realize that C.D.’s provide safety but at what price? Your guaranteed to lose money at the current rates they are paying. A wiser move may be to invest in some steady earning companies that pay a nice fat dividend instead. In addition to the much higher income you also get the possibility of appreciation in the share price.

Even if the share price drops your income should not be effected and many of the smarter investors look to buy more shares at a discount. There are some very good companies that pay 5% or higher dividends including:

1. Duke Energy (DUK) – This is an energy company operating in the U.S. under three sectors, franchised gas and electric, commercial power, and international energy. The stock is trading at $18.83/share and has an annual dividend of $1.00 (5.3% yield).

2. Elli Lilly – (LLY) – This is a pharmaceutical company that develops, manufactures, and sells pharmaceutical products worldwide. The stock is trading at $37.53/share and has an annual dividend of $1.96 (5.2% yield).

3. Vodaphone (VOD) – Vodafone Group plc provides mobile communications in Europe, Africa, the Asia Pacific, the Middle East, and the United States. The stock is trading at $26.72/share and has an annual dividend of $1.92 (7.3% yield).

4. Starwood Property Trust (STWD)– This is a real estate investment trust, primarily focuses on originating, investing in, financing, and managing commercial mortgage loans. The stock is trading at $20.51/share and has an annual dividend of $1.76 (8.8% yield).

No Minimum Or Penalty C.D.’s

You probably are familiar with C.D.’s (certificate of deposits) that can be bought at any bank however most C.D.’s have penalties for early withdrawals and a minimum deposit.

These minimum deposits usually start at $250 and up with most requiring at least a $1,000. Ally Bank has no minimum initial deposit and also has no penalty for early withdrawals. Since most C.D.’s are from 6 months to 5 years in length having access to your money is a nice option to have.

Ally bank also makes it easy to open and fund their C.D.’s since the entire process can be done online. Their rates are generally from 1-2% annual on 1 year C.D.’s which isn’t bad especially when you consider the fact that most checking and savings account pay under .5% annually.

If your looking to start saving on a limited budget this program is ideal. You won’t get rich from these C.D.’s but it’s a good way to get the savings momentum started while learning about C.D.’s. They also make a good plan to start an emergency fund of 6-9 months of monthly expenses.