Income Investors Rejoice

"Fixed income" has been an oxymoron for much of the past 15 years, as central banks' rock-bottom benchmark interest rates and bond-buying programs depressed yields on trillions of dollars of bonds to zero or below. 

It took a global monetary policy tightening campaign in 2022 and a brutal decline in bond prices—which move inversely to yields—to turn the tables. 

At the start of 2023, there are more opportunities for income-oriented investors to scoop up attractive yields than in years. Andrew Bary summed up the new landscape in Barron's latest cover story, a guide to the dozen best income investments for the new year:

Investors can get 3% to 5% yields on municipal bonds, 8% to 9% yields on junk debt, 6% to 8% on preferred stock, and 4% on risk-free short-term Treasuries.  Within the stock market, there are yields of 5% to 9% on pipeline companies, 6% on telecom operators, 4% on real estate investment trusts, and 3% on utilities and a broad group of dividend-paying companies, including big banks.

For the second-straight year, Andrew points to energy pipelines as the juiciest income investment on the market, with yields generally ranging from 5% to 9%. Most operators are focused on capital discipline and maintaining their dividends.

Williams Cos., Kinder Morgan, Enterprise Products Partners, and Energy Transfer are some of the major names in the space. There's also an ETF: Alerian MLP.

Dividend stocks in general look good for 2023, both in the U.S. and abroad. Andrew recommends the Vanguard High Dividend Yield ETF, whose top holdings include Johnson & Johnson, Exxon Mobil, and JPMorgan Chase. Its yield of 3% is almost double the S&P 500’s dividend yield. Outside the U.S., Andrew points to the iShares International Select Dividend ETF. 

Andrew also makes the case for junk bonds, convertible bonds, and more in 2023. Read his full report here.