We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Improve Your Retirement Income with These 3 Top-Ranked Dividend Stocks - August 19, 2020
Read MoreHide Full Article
Here's an eye-opening statistic: older Americans are more afraid of running out of money than of death itself.
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.
In today's economic environment, traditional income investments are not working.
For many years, bonds or other fixed-income assets could produce the yield needed to provide solid income for retirement needs. However, these yields have dwindled over time: 10-year Treasury bond rates in the late 1990s were around 6.50%, but today, that rate is a thing of the past, with a slim likelihood of rates making a comeback in the foreseeable future.
While this yield reduction may not seem drastic, it adds up: for a $1 million investment in 10-year Treasuries, the rate drop means a difference in yield of 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
We feel that these dividend-paying equities - as long as they are from high-quality, low-risk issuers - can give retirement investors a smart option to replace low-yielding Treasury bonds (or other bonds).
For example, AT&T and Coca-Cola are income stocks with attractive dividend yields of 3% or better. Look for stocks like this that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions.
One approach to recognizing appropriate stocks is to look for companies with an average dividend yield of 3% and positive average annual dividend growth. Numerous stocks hike dividends over time, counterbalancing inflation risks.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
PSEG (PEG - Free Report) is currently shelling out a dividend of $0.49 per share, with a dividend yield of 3.59%. This compares to the Utility - Electric Power industry's yield of 3.44% and the S&P 500's yield of 1.63%. In terms of dividend growth, the company's current annualized dividend of $1.96 is up 4.26% from last year.
PGE (POR - Free Report) is paying out a dividend of 0.38 per share at the moment, with a dividend yield of 3.67% compared to the Utility - Electric Power industry's yield of 3.44% and the S&P 500's yield. Taking a look at the company's dividend growth, its current annualized dividend of $1.54 is flat compared to last year.
Currently paying a dividend of 0.19 per share, Spartan Stores (SPTN - Free Report) has a dividend yield of 3.69%. This is compared to the Food - Natural Foods Products industry's yield of 0% and the S&P 500's current yield. Looking at dividend growth, the company's current annualized dividend of $0.77 is up 1.32% from last year.
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
Pursuing a dividend investing strategy can help protect your retirement portfolio. Whether you choose to invest in stocks or through low-fee mutual funds or ETFs, this approach can potentially help you achieve a more secure and enjoyable retirement.
Generating income is just one aspect of planning for a comfortable retirement.
To learn more ways to maximize your assets - and avoid pitfalls that could jeopardize your financial security - download our free report:
Image: Bigstock
Improve Your Retirement Income with These 3 Top-Ranked Dividend Stocks - August 19, 2020
Here's an eye-opening statistic: older Americans are more afraid of running out of money than of death itself.
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.
In today's economic environment, traditional income investments are not working.
For many years, bonds or other fixed-income assets could produce the yield needed to provide solid income for retirement needs. However, these yields have dwindled over time: 10-year Treasury bond rates in the late 1990s were around 6.50%, but today, that rate is a thing of the past, with a slim likelihood of rates making a comeback in the foreseeable future.
While this yield reduction may not seem drastic, it adds up: for a $1 million investment in 10-year Treasuries, the rate drop means a difference in yield of 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
We feel that these dividend-paying equities - as long as they are from high-quality, low-risk issuers - can give retirement investors a smart option to replace low-yielding Treasury bonds (or other bonds).
For example, AT&T and Coca-Cola are income stocks with attractive dividend yields of 3% or better. Look for stocks like this that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions.
One approach to recognizing appropriate stocks is to look for companies with an average dividend yield of 3% and positive average annual dividend growth. Numerous stocks hike dividends over time, counterbalancing inflation risks.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
PSEG (PEG - Free Report) is currently shelling out a dividend of $0.49 per share, with a dividend yield of 3.59%. This compares to the Utility - Electric Power industry's yield of 3.44% and the S&P 500's yield of 1.63%. In terms of dividend growth, the company's current annualized dividend of $1.96 is up 4.26% from last year.
PGE (POR - Free Report) is paying out a dividend of 0.38 per share at the moment, with a dividend yield of 3.67% compared to the Utility - Electric Power industry's yield of 3.44% and the S&P 500's yield. Taking a look at the company's dividend growth, its current annualized dividend of $1.54 is flat compared to last year.
Currently paying a dividend of 0.19 per share, Spartan Stores (SPTN - Free Report) has a dividend yield of 3.69%. This is compared to the Food - Natural Foods Products industry's yield of 0% and the S&P 500's current yield. Looking at dividend growth, the company's current annualized dividend of $0.77 is up 1.32% from last year.
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
Pursuing a dividend investing strategy can help protect your retirement portfolio. Whether you choose to invest in stocks or through low-fee mutual funds or ETFs, this approach can potentially help you achieve a more secure and enjoyable retirement.
Generating income is just one aspect of planning for a comfortable retirement.
To learn more ways to maximize your assets - and avoid pitfalls that could jeopardize your financial security - download our free report:
Will You Retire a Multi-Millionaire? 7 Things You Can Do Now