Dividend Corner: Buffett Buys JNJ; International Intrigue.

Value shoppers in search of income, I'd like to suggest you consider venturing beyond the bond aisle. Yes, I know it's comforting over there. And I am in no way suggesting you bail on bonds. But the massive investor appetite for bonds these days (and the outright shunning of stocks) overlooks a smart way to generate income right now. As we've covered here at MoneyWatch, dividend paying stocks are a compelling sweetspot in an otherwise sour-tasting market. The 3.4 percent yield on the SPDR Dividend ETF is more than the yield on the 20-year Treasury bond and not far off the 3.6 percent on the 30-Year Treasury. Yes, stocks are more volatile than bonds, but over the long-term they also provide more upside potential and better inflation protection.

Buffett's Latest Dividend Venture: Johnson & Johnson

In fact, plenty of solid blue-chip stocks are spitting out dividends that exceed long-bond returns. Warren Buffett's personal investment portfolio has long been a great tip sheet for dividend seekers. And in Berkshire Hathaway's latest SEC filing we got news that the mother company added a large slug of fresh Johnson & Johnson stock, upping its stake from 23.9 million shares to 41.3 million shares during the second quarter. Among JNJ's many allures is a juicy 3.7 yield. That's actually a higher payout than the yield on a new JNJ 10-year bond. Add in the fact that the stock's s 12 p/e is anything but rich, and a leading market position in a global growth market (you really think we're going to be using less drugs and health care products in the future?) and it's easy to see what got Berkshire's attention. In fact, JNJ has been a long-time Berkshire holding, but over the past two years the position was pared back, ostensibly to raise cash for some Berkshire acquisitions. The current stake is still below the 64 million shares Berkshire owned at the end of 2007.

International Intrigue
There's also an interesting dividend story playing out beyond our borders. While the S&P 500 index currently yields about 2 percent, the Vanguard Total International Stock Index (VGTSX) has a 2.46 percent yield. Over in ETFs, there's SPDR S&P International Dividend (DWX) which yields 4.4 percent, WisdomTree DEFA (DWM) which currently yields 4.7 percent, and PowerShares International Dividend Shares (PID) with a 2.96 yield. Investment advisor John Eckel of Pinnacle Investments recently told me he adds an international spin to his dividend investing with Matthews Asian Growth & Income (MACSX, 2.5 percent yield) and Matthews Asia Dividend Fund (MAPIX, 3.3 percent yield.)

As explained in 10 Ways to Earn Higher Yield it's never advisable to do a wholesale swap of bonds for stocks (or vice versa) Totally different risk profiles and roles in your portfolio. A small tactical shift is okay, but if you're hungry for income, the better tactic is to move some of your existing stock portfolio -domestic and international- toward dividend payers that can give you the income you want over the short-term, while also keeping you positioned to capture the potential inflation-beating long-term gains that only stocks can provide.

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