Where are the higher yields for investing?

As if we didn’t have enough economic trouble, unemployment has hit its highest rate since the Great Depression, small businesses are hanging on for dear life and real (after inflation) interest rates are negative. This creates serious problems for savers and retirees who are relying on investment and savings income to live.

At these historically low rates, inflation is eroding the value of our savings, adding to the fact we are unable to achieve a reasonable level of income.

So, where to look for higher yields without taking on unintended risk?

Resist the siren song of the highest yielding stocks. Beware the elevated yields of this cohort, which often reflect investor concern. The worry may center on potential insolvency, deteriorating business conditions or an impaired business model that defies turnaround.

The sustainability of the dividend is also often suspect (recent dividend cuts and eliminations are at recent highs) and the potential for capital appreciation, slim. If the dividend is safe, you should ask why management and the board of directors are willing to pay such a high premium? Subpar earnings and growth prospects would be a good place to start.

Take a look a these high yielding stocks: Exxon Mobil yields 7.8%; Simon Property Group yields 15.4%; Dow Inc. yields 7.8% and The Gap yields 11.8%.

You tell me. Are those dividend yields sustainable? And are these companies you want to own? The yields are telling you the risk is high.

There may be better sources of income.