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Improve Your Retirement Income with These 3 Top-Ranked Dividend Stocks
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Here's an eye-opening statistic: older Americans are more afraid of running out of money than of death itself.
Also, retirees who have constructed a nest egg have valid justifications to be concerned, since the traditional ways to plan for retirement may mean income can no longer cover expenses. Some retirees are now tapping their principal to make a decent living, pressed for time between decreasing investment balances and longer life expectancies.
Your parents' retirement investing plan won't cut it 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.
That means if you had $1 million in 10-year Treasuries, the difference in yield between 1999 and today is more than $1 million.
In addition to the considerable drop in bond yields, today's retirees are nervous about their future Social Security benefits. Because of certain demographic factors, it's been estimated that the funds that pay the Social Security benefits will run out of money in 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.
The Bank of New York Mellon Corporation (BK - Free Report) is currently shelling out a dividend of $0.42 per share, with a dividend yield of 3.06%. This compares to the Banks - Major Regional industry's yield of 3.71% and the S&P 500's yield of 1.6%. The company's annualized dividend growth in the past year was 13.51%. Check The Bank of New York Mellon Corporation (BK - Free Report) dividend history here>>>
Smucker (SJM - Free Report) is paying out a dividend of $1.06 per share at the moment, with a dividend yield of 3.29% compared to the Food - Miscellaneous industry's yield of 0% and the S&P 500's yield. The annualized dividend growth of the company was 3.92% over the past year. Check Smucker (SJM - Free Report) dividend history here>>>
Currently paying a dividend of $0.22 per share, TIM S.A. Sponsored ADR (TIMB - Free Report) has a dividend yield of 4.89%. This is compared to the Wireless Non-US industry's yield of 1.32% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 139.79%. Check TIM S.A. Sponsored ADR (TIMB - Free Report) dividend history here>>>
But aren't stocks generally more risky than bonds?
The fact is that stocks, as an asset class, carry more risk than bonds. To counterbalance this, invest in superior quality dividend stocks that not only can grow over time but more significantly, can also decrease your overall portfolio volatility with respect to the broader stock market.
An upside to adding dividend stocks to your retirement portfolio: they can help lessen the effects of inflation, since many dividend-paying companies (especially blue chip stocks) generally increase their dividends over time.
Thinking about dividend-focused mutual funds or ETFs? Watch out for fees.
If you prefer investing in funds or ETFs compared to individual stocks, you can still pursue a dividend income strategy. However, it's important to know the fees charged by each fund or ETF, which can ultimately reduce your dividend income, working against your strategy. Do your homework and make sure you know the fees charged by any fund before you invest.
Bottom Line
Whether you select high-quality, low-fee funds or stocks, seeking the steady income of dividend-paying equities can potentially offer you a path to a better and more stress-free retirement.
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Improve Your Retirement Income with These 3 Top-Ranked Dividend Stocks
Here's an eye-opening statistic: older Americans are more afraid of running out of money than of death itself.
Also, retirees who have constructed a nest egg have valid justifications to be concerned, since the traditional ways to plan for retirement may mean income can no longer cover expenses. Some retirees are now tapping their principal to make a decent living, pressed for time between decreasing investment balances and longer life expectancies.
Your parents' retirement investing plan won't cut it 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.
That means if you had $1 million in 10-year Treasuries, the difference in yield between 1999 and today is more than $1 million.
In addition to the considerable drop in bond yields, today's retirees are nervous about their future Social Security benefits. Because of certain demographic factors, it's been estimated that the funds that pay the Social Security benefits will run out of money in 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.
The Bank of New York Mellon Corporation (BK - Free Report) is currently shelling out a dividend of $0.42 per share, with a dividend yield of 3.06%. This compares to the Banks - Major Regional industry's yield of 3.71% and the S&P 500's yield of 1.6%. The company's annualized dividend growth in the past year was 13.51%. Check The Bank of New York Mellon Corporation (BK - Free Report) dividend history here>>>
Smucker (SJM - Free Report) is paying out a dividend of $1.06 per share at the moment, with a dividend yield of 3.29% compared to the Food - Miscellaneous industry's yield of 0% and the S&P 500's yield. The annualized dividend growth of the company was 3.92% over the past year. Check Smucker (SJM - Free Report) dividend history here>>>
Currently paying a dividend of $0.22 per share, TIM S.A. Sponsored ADR (TIMB - Free Report) has a dividend yield of 4.89%. This is compared to the Wireless Non-US industry's yield of 1.32% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 139.79%. Check TIM S.A. Sponsored ADR (TIMB - Free Report) dividend history here>>>
But aren't stocks generally more risky than bonds?
The fact is that stocks, as an asset class, carry more risk than bonds. To counterbalance this, invest in superior quality dividend stocks that not only can grow over time but more significantly, can also decrease your overall portfolio volatility with respect to the broader stock market.
An upside to adding dividend stocks to your retirement portfolio: they can help lessen the effects of inflation, since many dividend-paying companies (especially blue chip stocks) generally increase their dividends over time.
Thinking about dividend-focused mutual funds or ETFs? Watch out for fees.
If you prefer investing in funds or ETFs compared to individual stocks, you can still pursue a dividend income strategy. However, it's important to know the fees charged by each fund or ETF, which can ultimately reduce your dividend income, working against your strategy. Do your homework and make sure you know the fees charged by any fund before you invest.
Bottom Line
Whether you select high-quality, low-fee funds or stocks, seeking the steady income of dividend-paying equities can potentially offer you a path to a better and more stress-free retirement.