During last week's bond blizzard, Johnson & Johnson (NYSE: JNJ) was able to issue 10-year notes with a coupon rate only a few ticks above its stock dividend yield. Not quite as impressive as last year when it sold 10-year notes yielding less than the stock, but it still sets up a scenario where Johnson & Johnson could improve its cash flow by issuing debt and using the money to buy back stock.

With the low bond yield, income investors considering Johnson & Johnson bonds should consider the stock instead.  It's very unlikely the bonds will outperform the income stream from the stock over the next 10 years, given Johnson & Johnson's history of dividend hikes.

A search at FINRA.org for high-quality, investment grade bonds with approximately 10 years until maturity turned up several issues with yields less than or close to the same company's stock dividend yield. In addition, each of the companies listed below has increased or at least maintained its dividend over the past several years, including through the financial crisis of 2008-2009.


Stock Dividend Yield

Bond Maturity

Recent Bond Yield to Maturity

Abbott Laboratories (NYSE: ABT)




Colgate-Palmolive (NYSE: CL)




Conoco Phillips (NYSE: COP)




Johnson & Johnson




Kimberly-Clark (NYSE: KMB)




Merck (NYSE: MRK)




Southern (NYSE: SO)*




Source: Finra.org. *Bonds issued by subsidiary Alabama Power.

In each of these cases, the stock of the issuer looks like an attractive alternative to the corresponding bond for income investors. Like any screen results, this list is a starting point for further research, not a recommendation to buy the stock.

Stocks aren't bonds, and the risk profiles are different. Shareholders face market risks, and companies can cut dividends, make dilutive stock offerings, or make ill-advised acquisitions. Bondholders face interest rate risk -- if rates rise, bond values will drop -- as well as credit risk.

At today's market prices, I think interest rate risks for high quality bonds aren't reflected in the prices and that the bond-versus-stock playing field is tilted in favor of stocks for many companies. That doesn't mean investors should ignore bonds, but they should consider stocks for at least part of an income-oriented portfolio.

You can follow any of the stocks mentioned using our free watchlist service, My Watchlist.

Fool contributor Russ Krull owns shares of Johnson & Johnson and Southern but has no financial position in any other companies mentioned in this article. The Motley Fool owns shares of Abbott Laboratories and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Abbott Laboratories, Kimberly-Clark, Johnson & Johnson, and Southern, as well as creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.