Bond yields remain stubbornly low. You can achieve a 3% dividend yield on a reasonably diversified portfolio of high dividend stocks, which is about the same as the yield of an intermediate term high quality bond portfolio. Dividends are also generally taxed at a lower rate than bond interest. Additionally, a company may increase its dividend rate, but a bond’s interest payment will always remain the same. Finally, stocks may increase in value, but a bond will only be worth its face value at maturity.
In my opinion, its that latter two reasons why I don’t feel high dividend paying stocks are good bond substitutes – companies can change dividend rates and stock prices fluctuate. History shows that dividends and stock prices don’t always go up – dividends can be cut and stock prices can drop. Both can be big problems for investors, such as retirees, who need consistent cash flow and portfolio stability. To balance growth and income with modest volatility, a portfolio containing a mix of stocks (including high dividend stocks) and bonds is often the best approach.
Read an article on the topic from Morningstar, a leading investment research firm.
https://www.morningstar.com/articles/922365/are-dividendpaying-stocks-a-good-substitute-for-bo.html