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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.
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.
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.
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
Dividend-paying stocks from low-risk, high-quality companies are a smart way to generate steady and reliable attractive income streams to replace low risk, low yielding Treasury and bond options.
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.
Greif (GEF - Free Report) is currently shelling out a dividend of $0.5 per share, with a dividend yield of 3.13%. This compares to the Containers - Paper and Packaging industry's yield of 2.19% and the S&P 500's yield of 1.77%. The company's annualized dividend growth in the past year was 4.55%. Check Greif (GEF - Free Report) dividend history here>>>
NexPoint Residential Trust Inc. (NXRT - Free Report) is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 3.09% compared to the REIT and Equity Trust - Residential industry's yield of 3.14% and the S&P 500's yield. The annualized dividend growth of the company was 11.36% over the past year. Check NexPoint Residential Trust Inc. (NXRT - Free Report) dividend history here>>>
Currently paying a dividend of $0.15 per share, Retail Opportunity Investments (ROIC - Free Report) has a dividend yield of 3.93%. This is compared to the REIT and Equity Trust - Retail industry's yield of 4.56% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 18.18%. Check Retail Opportunity Investments (ROIC - Free Report) dividend history here>>>
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.
A silver lining to owning dividend stocks for your retirement portfolio is that many companies, especially blue chip stocks, increase their dividends over time, helping offset the effects 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
Regardless of whether you select high-quality, low-fee funds or stocks, looking for a steady stream of income from dividend-paying equities can potentially lead you to a solid and more peaceful retirement.
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3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income
Strange but true: seniors fear death less than running out of money in retirement.
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.
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.
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
Dividend-paying stocks from low-risk, high-quality companies are a smart way to generate steady and reliable attractive income streams to replace low risk, low yielding Treasury and bond options.
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.
Greif (GEF - Free Report) is currently shelling out a dividend of $0.5 per share, with a dividend yield of 3.13%. This compares to the Containers - Paper and Packaging industry's yield of 2.19% and the S&P 500's yield of 1.77%. The company's annualized dividend growth in the past year was 4.55%. Check Greif (GEF - Free Report) dividend history here>>>
NexPoint Residential Trust Inc. (NXRT - Free Report) is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 3.09% compared to the REIT and Equity Trust - Residential industry's yield of 3.14% and the S&P 500's yield. The annualized dividend growth of the company was 11.36% over the past year. Check NexPoint Residential Trust Inc. (NXRT - Free Report) dividend history here>>>
Currently paying a dividend of $0.15 per share, Retail Opportunity Investments (ROIC - Free Report) has a dividend yield of 3.93%. This is compared to the REIT and Equity Trust - Retail industry's yield of 4.56% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 18.18%. Check Retail Opportunity Investments (ROIC - Free Report) dividend history here>>>
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.
A silver lining to owning dividend stocks for your retirement portfolio is that many companies, especially blue chip stocks, increase their dividends over time, helping offset the effects 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
Regardless of whether you select high-quality, low-fee funds or stocks, looking for a steady stream of income from dividend-paying equities can potentially lead you to a solid and more peaceful retirement.