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3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income
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Believe it or not, seniors fear running out of cash more than they fear dying.
And retirees have good reason to be worried about making their assets last. People are living longer, so that money has to cover a longer period. Making matters worse, income generated using tried-and-true retirement planning approaches may not cover expenses these days. That means seniors must dip into principal to meet living expenses.
Retirement investing approaches of the past don't work today.
For example, 10-year Treasury bonds in the late 1990s offered a yield of around 6.50%, which translated to an income source you could count on. However, today's yield is much lower and probably not a viable return option to fund typical retirements.
The impact of this rate decline is sizable: over 20 years, the difference in yield for a $1 million investment in 10-year Treasuries is more than $1 million.
Today's retirees are getting hit hard by reduced bond yields - and the Social Security picture isn't too rosy either. Right now and for the near future, Social Security benefits are still being paid, but it has been estimated that the Social Security funds will be depleted as soon as 2035.
So what can retirees do? You could dramatically reduce your expenses, and go out on a limb hoping your Social Security benefits don't diminish. On the other hand, you could opt for an alternative investment that gives a steady, higher-rate income stream to supplant lessening bond yields.
Invest in Dividend Stocks
As we see it, dividend-paying stocks from generally low-risk, top notch companies are a brilliant way to create steady and solid income streams to supplant low risk, low yielding Treasury and fixed-income alternatives.
Look for stocks that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions.
One way to identify suitable candidates is to look for stocks with an average dividend yield of 3%, and positive average annual dividend growth. Many stocks increase dividends over time, helping to offset the effects of inflation.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
Bristol Myers Squibb (BMY - Free Report) is currently shelling out a dividend of $0.57 per share, with a dividend yield of 3.23%. This compares to the Medical - Biomedical and Genetics industry's yield of 0% and the S&P 500's yield of 1.71%. The company's annualized dividend growth in the past year was 5.56%. Check Bristol Myers Squibb (BMY - Free Report) dividend history here>>>
East West Bancorp (EWBC - Free Report) is paying out a dividend of $0.48 per share at the moment, with a dividend yield of 3.5% compared to the Banks - West industry's yield of 3.4% and the S&P 500's yield. The annualized dividend growth of the company was 20% over the past year. Check East West Bancorp (EWBC - Free Report) dividend history here>>>
Currently paying a dividend of $0.2 per share, OceanFirst Financial (OCFC - Free Report) has a dividend yield of 4.92%. This is compared to the Financial - Savings and Loan industry's yield of 3.05% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 17.65%. Check OceanFirst Financial (OCFC - Free Report) dividend history here>>>
But aren't stocks generally more risky than bonds?
Yes, that's true. As a broad category, bonds carry less risk than stocks. However, the stocks we are talking about - dividend -paying stocks from high-quality companies - can generate income over time and also mitigate the overall volatility of your portfolio compared to the stock market as a whole.
Combating the impact of inflation is one advantage of owning these dividend-paying stocks. Here's why: many of these stable, high-quality companies increase their dividends over time, which translates to rising dividend income that offsets the effects of inflation.
Thinking about dividend-focused mutual funds or ETFs? Watch out for fees.
If you're interested in investing in dividends, but are thinking about mutual funds or ETFs rather than stocks, beware of fees. Mutual funds and specialized ETFs may carry high fees, which could lower the overall gains you earn from dividends, undercutting your dividend income strategy. Be sure to look for funds with low fees if you decide on this approach.
Bottom Line
Seeking steady, consistent income through dividends can be a smart option for financial security in retirement, whether you invest in mutual funds, ETFs, or in dividend-paying stocks.
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3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income
Believe it or not, seniors fear running out of cash more than they fear dying.
And retirees have good reason to be worried about making their assets last. People are living longer, so that money has to cover a longer period. Making matters worse, income generated using tried-and-true retirement planning approaches may not cover expenses these days. That means seniors must dip into principal to meet living expenses.
Retirement investing approaches of the past don't work today.
For example, 10-year Treasury bonds in the late 1990s offered a yield of around 6.50%, which translated to an income source you could count on. However, today's yield is much lower and probably not a viable return option to fund typical retirements.
The impact of this rate decline is sizable: over 20 years, the difference in yield for a $1 million investment in 10-year Treasuries is more than $1 million.
Today's retirees are getting hit hard by reduced bond yields - and the Social Security picture isn't too rosy either. Right now and for the near future, Social Security benefits are still being paid, but it has been estimated that the Social Security funds will be depleted as soon as 2035.
So what can retirees do? You could dramatically reduce your expenses, and go out on a limb hoping your Social Security benefits don't diminish. On the other hand, you could opt for an alternative investment that gives a steady, higher-rate income stream to supplant lessening bond yields.
Invest in Dividend Stocks
As we see it, dividend-paying stocks from generally low-risk, top notch companies are a brilliant way to create steady and solid income streams to supplant low risk, low yielding Treasury and fixed-income alternatives.
Look for stocks that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions.
One way to identify suitable candidates is to look for stocks with an average dividend yield of 3%, and positive average annual dividend growth. Many stocks increase dividends over time, helping to offset the effects of inflation.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
Bristol Myers Squibb (BMY - Free Report) is currently shelling out a dividend of $0.57 per share, with a dividend yield of 3.23%. This compares to the Medical - Biomedical and Genetics industry's yield of 0% and the S&P 500's yield of 1.71%. The company's annualized dividend growth in the past year was 5.56%. Check Bristol Myers Squibb (BMY - Free Report) dividend history here>>>
East West Bancorp (EWBC - Free Report) is paying out a dividend of $0.48 per share at the moment, with a dividend yield of 3.5% compared to the Banks - West industry's yield of 3.4% and the S&P 500's yield. The annualized dividend growth of the company was 20% over the past year. Check East West Bancorp (EWBC - Free Report) dividend history here>>>
Currently paying a dividend of $0.2 per share, OceanFirst Financial (OCFC - Free Report) has a dividend yield of 4.92%. This is compared to the Financial - Savings and Loan industry's yield of 3.05% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 17.65%. Check OceanFirst Financial (OCFC - Free Report) dividend history here>>>
But aren't stocks generally more risky than bonds?
Yes, that's true. As a broad category, bonds carry less risk than stocks. However, the stocks we are talking about - dividend -paying stocks from high-quality companies - can generate income over time and also mitigate the overall volatility of your portfolio compared to the stock market as a whole.
Combating the impact of inflation is one advantage of owning these dividend-paying stocks. Here's why: many of these stable, high-quality companies increase their dividends over time, which translates to rising dividend income that offsets the effects of inflation.
Thinking about dividend-focused mutual funds or ETFs? Watch out for fees.
If you're interested in investing in dividends, but are thinking about mutual funds or ETFs rather than stocks, beware of fees. Mutual funds and specialized ETFs may carry high fees, which could lower the overall gains you earn from dividends, undercutting your dividend income strategy. Be sure to look for funds with low fees if you decide on this approach.
Bottom Line
Seeking steady, consistent income through dividends can be a smart option for financial security in retirement, whether you invest in mutual funds, ETFs, or in dividend-paying stocks.