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3 Top Dividend Stocks to Maximize Your Retirement Income

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Believe it or not, seniors fear running out of cash more than they fear dying.

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.

The effect of this drop in rates is substantial: over 20 years, the change in yield for a $1 million investment in 10-year Treasuries is over $1 million.

And lower bond yields aren't the only potential problem seniors are facing. Today's retirees aren't feeling as secure as they once did about Social Security, either. Benefit checks will still be coming for the foreseeable future, but based on current estimates, Social Security funds will run out of money in 2035.

So what's a retiree to do? You could cut your expenses to the bone, and take the risk that your Social Security checks don't shrink. Or you could find an alternative investment that provides a steady, higher-rate income stream to replace dwindling bond yields.

Invest in Dividend Stocks

As a replacement for low yielding Treasury bonds (and other bond options), we believe dividend-paying stocks from high quality companies offer low risk and stable, predictable income investors in retirement seek.

Look for stocks that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions.

A rule of thumb for finding solid income-producing stocks is to seek those that average 3% dividend yield, and positive yearly dividend growth. These stocks can help combat inflation by boosting dividends over time.

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 4.21%. This compares to the REIT and Equity Trust - Retail industry's yield of 4.11% and the S&P 500's yield of 1.62%. The company's annualized dividend growth in the past year was 11.63%. Check Brixmor Property (BRX - Free Report) dividend history here>>>

Eni SpA (E - Free Report) is paying out a dividend of $0.31 per share at the moment, with a dividend yield of 5.26% compared to the Oil and Gas - Integrated - International industry's yield of 3.65% and the S&P 500's yield. The annualized dividend growth of the company was 58.96% over the past year. Check Eni SpA (E - Free Report) dividend history here>>>

Currently paying a dividend of $0.32 per share, First Merchants (FRME - Free Report) has a dividend yield of 3.11%. This is compared to the Banks - Midwest industry's yield of 2.62% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 10.34%. Check First Merchants (FRME - Free Report) dividend history here>>>

But aren't stocks generally more risky than bonds?

It is true that stocks, as an asset class, carry more risk than bonds, but high-quality dividend stocks not only have the ability to produce income growth over time but more importantly, can also reduce your overall portfolio volatility relative to the broader stock market.

An advantage of owning dividend stocks for your retirement nest egg is that numerous companies, particularly blue chip stocks, raise their dividends over time, helping alleviate the impact of inflation on your potential retirement income.

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:


Eni SpA (E) - free report >>

First Merchants Corporation (FRME) - free report >>

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

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