Long-Term Treasury Yields Now Beat These Dividend Stalwarts. Is Government Debt the Top Passive-Income Play?

As inflation remains high and the Federal Reserve's 2% target is far from being met, long-term Treasury yields have climbed in the past year. This suggests that elevated interest rates could persist for a long time. Income investors must decide whether to invest in traditional dividend-paying companies or U.S. government bonds. While Treasury yields now exceed 5% for 10-year, 20-year, and 30-year bonds, these yields are still lower than the dividends of some blue-chip companies like Coca-Cola (2.4%) and Procter & Gamble (2.95%).

However, Treasury bonds offer tax advantages and are considered risk-free. Over the past decade, Coca-Cola's dividend increased by 51%, and Procter & Gamble's dividend rose by 63%. Additionally, both companies have a long history of paying dividends, with Coca-Cola raising its payout for 64 straight years and Procter & Gamble for 136 consecutive years.

While stocks like Coca-Cola and Procter & Gamble have provided significant growth, U.S. Treasuries are exempt from state and local taxes. This analysis suggests that dividend-paying stocks may be a better investment option compared to U.S. government bonds.