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3 Top Dividend Stocks to Maximize Your Retirement Income

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

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.

Your parents' retirement investing plan won't cut it today.

In the past, investors going into retirement could invest in bonds and count on attractive yields to produce steady, reliable income streams to fund a predictable retirement. 10-year Treasury bond rates in the late 1990s hovered around 6.50%, whereas the current rate is much lower.

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.

How can you avoid dipping into your principal when the investments you counted on in retirement aren't producing income? You can only cut your expenses so far, and the only other option is to find a different investment vehicle to generate income.

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.

Going beyond those familiar names, you can find excellent dividend-paying stocks by following a few guidelines. Look for companies that pay a dividend yield of around 3%, with positive annual dividend growth. The growth rate is key to help combat the effects of inflation.

Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.

Acadia Realty Trust (AKR - Free Report) is currently shelling out a dividend of $0.18 per share, with a dividend yield of 4.7%. This compares to the REIT and Equity Trust - Retail industry's yield of 4.34% and the S&P 500's yield of 1.72%. The company's annualized dividend growth in the past year was 20%. Check Acadia Realty Trust (AKR - Free Report) dividend history here>>>

BP (BP - Free Report) is paying out a dividend of $0.36 per share at the moment, with a dividend yield of 4.58% compared to the Oil and Gas - Integrated - International industry's yield of 3.81% and the S&P 500's yield. The annualized dividend growth of the company was 4.06% over the past year. Check BP (BP - Free Report) dividend history here>>>

Currently paying a dividend of $0.22 per share, Cadence (CADE - Free Report) has a dividend yield of 3.32%. This is compared to the Banks - Southeast industry's yield of 1.93% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 15.79%. Check Cadence (CADE - 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're thinking, "I want to invest in a dividend-focused ETF or mutual fund," make sure to do your homework. It's important to know that some mutual funds and specialized ETFs charge high fees, which may diminish your dividend gains or income and thwart the overall objective of this investment strategy. If you do want to invest in fund, research well to identify the best-quality dividend funds with the least charges.

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.


In-Depth Zacks Research for the Tickers Above


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


BP p.l.c. (BP) - free report >>

Acadia Realty Trust (AKR) - free report >>

Cadence Bank (CADE) - free report >>

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