Back to top

Image: Bigstock

Improve Your Retirement Income with These 3 Top-Ranked Dividend Stocks

Read MoreHide Full Article

Here's a revealing data point: older Americans are scared more of outliving wealth than of death itself.

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.

In today's economic environment, traditional income investments are not working.

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.

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

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.

Acadia Realty Trust (AKR - Free Report) is currently shelling out a dividend of $0.18 per share, with a dividend yield of 5.24%. This compares to the REIT and Equity Trust - Retail industry's yield of 4.76% and the S&P 500's yield of 1.83%. The company's annualized dividend growth in the past year was 20%. Check Acadia Realty Trust (AKR - Free Report) dividend history here>>>

Brookfield Infrastructure Partners (BIP - Free Report) is paying out a dividend of $0.36 per share at the moment, with a dividend yield of 3.64% compared to the REIT and Equity Trust - Other industry's yield of 4.34% and the S&P 500's yield. The annualized dividend growth of the company was 5.88% over the past year. Check Brookfield Infrastructure Partners (BIP - Free Report) dividend history here>>>

Currently paying a dividend of $0.22 per share, Cadence (CADE - Free Report) has a dividend yield of 3.39%. This is compared to the Banks - Southeast industry's yield of 2.08% 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?

Overall, that is true. But stocks are a broad class, and you can reduce the risks significantly by selecting high-quality dividend stocks that can generate regular, predictable income and can also decrease the volatility of your portfolio compared to the overall 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'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.


In-Depth Zacks Research for the Tickers Above


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


Brookfield Infrastructure Partners LP (BIP) - free report >>

Acadia Realty Trust (AKR) - free report >>

Cadence Bank (CADE) - free report >>

Published in