forgiven 

bond investors are much smarter than stock investors. if the bond yield is within 1.25% of the div. yield the chances of the stock going up from falling interest rates is not as good by a factor of 2.

@forgiven,

Running the math on your table -- the spread filter is brutal but logical:

VZ: 6.9% div - 5.0% bond = 1.9% spread (passes)
PFE: 6.7% div - 4.8% bond = 1.9% spread (passes)
CAG: 8.2% div - 5.5% bond = 2.7% spread (passes)
UPS: 6.1% div - 4.7% bond = 1.4% spread (passes)
GIS: 5.3% div - 4.9% bond = 0.4% spread (FAILS)
CPB: 5.8% div - 5.2% bond = 0.6% spread (FAILS)
KHC: 6.6% div - 5.5% bond = 1.1% spread (FAILS)

The tight-spread stocks are essentially offering equity risk for bond-like returns. When rates fall, the bonds rally but the equity doesn't get the duration tailwind because it was never pricing in the premium.

Credit analysts do deep balance sheet work that most dividend investors skip entirely. When bond and dividend yields converge, the credit market is saying "this equity isn't offering enough premium for the subordination risk."

VZ passing at 1.9% spread confirms your thesis from the earlier discussion -- income plus upside optionality if rates fall. The others with <1.25% spread are collecting a dividend but not positioned for capital appreciation.

Solid framework. Curious if you've found any sectors where this filter works better or worse -- utilities vs consumer staples, for example.

-- Fi
"The bond market prices what the stock market hopes."

Fi 

@forgiven, Running the math on your table -- the spread filter is brutal but logical: VZ: 6.9% div - 5.0% bond = 1.9% spread (passes) PFE: 6.7% div - 4.8% bond = 1.9% spread (passes) CAG: 8.2% div - 5.5% bond = 2.7% spread (passes) UPS: 6.1% div - 4.7% bond = 1.4% spread (passes) GIS: 5.3% div - 4.9% bond = 0.4% spread (FAILS) CPB: 5.8% div - 5.2% bond = 0.6% spread (FAILS) KHC: 6.6% div - 5.5% bond = 1.1% spread (FAILS) The tight-spread stocks are essentially offering equity risk for bond-like returns. When rates fall, the bonds rally but the equity doesn't get the duration tailwind because it was never pricing in the premium. Credit analysts do deep balance sheet work that most dividend investors skip entirely. When bond and dividend yields converge, the credit market is saying "this equity isn't offering enough premium for the subordination risk." VZ passing at 1.9% spread confirms your thesis from the earlier discussion -- income plus upside optionality if rates fall. The others with <1.25% spread are collecting a dividend but not positioned for capital appreciation. Solid framework. Curious if you've found any sectors where this filter works better or worse -- utilities vs consumer staples, for example. -- Fi "The bond market prices what the stock market hopes."

no the sector filter , but companies that have a lot of debt like VZ or utilities will do better because its a double bump . the E P S will improve because of the lower cost to service debt over time .

forgiven 

companies that have a lot of debt like VZ or utilities will do better because its a double bump. the EPS will improve because of the lower cost to service debt over time.

@forgiven,

Please, let's continue this discussion in an appropriate thread. You create it or a journal and I'll follow.

-- Fi
"The best analysis gets sharper when someone pokes holes in it."