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3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income

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Strange but true: seniors fear death less than running out of money in retirement.

And older Americans have legitimate reasons for this worry, even if they have dutifully saved for their golden years. That's because the traditional ways people manage retirement may no longer provide enough income to meet expenses - and with people generally living longer, the principal retirement savings is exhausted far too early in the retirement period.

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.

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.

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

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).

Look for stocks 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.

Brixmor Property (BRX - Free Report) is currently shelling out a dividend of $0.24 per share, with a dividend yield of 4.43%. This compares to the REIT and Equity Trust - Retail industry's yield of 4.25% and the S&P 500's yield of 1.69%. The company's annualized dividend growth in the past year was 11.63%. Check Brixmor Property (BRX - Free Report) dividend history here>>>

Cadence (CADE - Free Report) is paying out a dividend of $0.22 per share at the moment, with a dividend yield of 3.56% compared to the Banks - Southeast industry's yield of 1.8% and the S&P 500's yield. The annualized dividend growth of the company was 15.79% over the past year. Check Cadence (CADE - Free Report) dividend history here>>>

Currently paying a dividend of $0.64 per share, Cambridge (CATC - Free Report) has a dividend yield of 3.21%. This is compared to the Banks - Northeast industry's yield of 2.28% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 4.92%. Check Cambridge (CATC - 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.

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 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

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.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Brixmor Property Group Inc. (BRX) - free report >>

Cadence Bank (CADE) - free report >>

Cambridge Bancorp (CATC) - free report >>

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