In the case of Johnson & Johnson, if the company were to continue to increase its dividend for the next 10 years as it did for the previous ten years, then today's 3.70% dividend yield would rise to about 14% (of cost).
To be clear, the buyer of Johnson & Johnson's bonds is willing to receive a fixed 3.10% in interest for the next ten years whereas the shareholder has the potential to earn a rising stream of income that would increase as the dividend rises over time.
Looking at the facts at face value, it would seem hard to find a valid reason to be a buyer of bonds for an intermediate to longer term period. However, as debate rages within the markets about whether or not the economy will enter into a double dip recession or even if deflation is about to take root , it can be seen that investors are being driven at least in part by fear.
As history has shown time and again, the fear trade usually feels like the right thing to do but it is often the wrong trade. While it is simply too early to say that the stock market is about to embark on a raging bull market like the 1980s or 1990s, one of the yard sticks that well known bearish investors have always mentioned as being evidence that the bear market was winding down or at least long in the tooth is seeing quality blue chip companies driven to extremely low valuations. Perhaps we are closer than we think.