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How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks
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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.
Retirement investing approaches of the past don't work 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.
That means if you had $1 million in 10-year Treasuries, the difference in yield between 1999 and today is 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'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.
One way to identify suitable candidates is to look for stocks with an average dividend yield of 3%, and positive average annual dividend growth. Many stocks increase dividends over time, helping to offset the effects of inflation.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
Global Partners LP (GLP - Free Report) is currently shelling out a dividend of $0.63 per share, with a dividend yield of 8.23%. This compares to the Oil and Gas - Refining and Marketing - Master Limited Partnerships industry's yield of 7.11% and the S&P 500's yield of 1.72%. The company's annualized dividend growth in the past year was 5.22%. Check Global Partners LP (GLP - Free Report) dividend history here>>>
OceanFirst Financial (OCFC - Free Report) is paying out a dividend of $0.2 per share at the moment, with a dividend yield of 3.69% compared to the Financial - Savings and Loan industry's yield of 2.49% and the S&P 500's yield. The annualized dividend growth of the company was 17.65% over the past year. Check OceanFirst Financial (OCFC - Free Report) dividend history here>>>
Currently paying a dividend of $1.5 per share, The PNC Financial Services Group, Inc (PNC - Free Report) has a dividend yield of 3.68%. This is compared to the Banks - Major Regional industry's yield of 3.66% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 20%. Check The PNC Financial Services Group, Inc (PNC - 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.
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 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
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.
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How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks
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.
Retirement investing approaches of the past don't work 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.
That means if you had $1 million in 10-year Treasuries, the difference in yield between 1999 and today is 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'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.
One way to identify suitable candidates is to look for stocks with an average dividend yield of 3%, and positive average annual dividend growth. Many stocks increase dividends over time, helping to offset the effects of inflation.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
Global Partners LP (GLP - Free Report) is currently shelling out a dividend of $0.63 per share, with a dividend yield of 8.23%. This compares to the Oil and Gas - Refining and Marketing - Master Limited Partnerships industry's yield of 7.11% and the S&P 500's yield of 1.72%. The company's annualized dividend growth in the past year was 5.22%. Check Global Partners LP (GLP - Free Report) dividend history here>>>
OceanFirst Financial (OCFC - Free Report) is paying out a dividend of $0.2 per share at the moment, with a dividend yield of 3.69% compared to the Financial - Savings and Loan industry's yield of 2.49% and the S&P 500's yield. The annualized dividend growth of the company was 17.65% over the past year. Check OceanFirst Financial (OCFC - Free Report) dividend history here>>>
Currently paying a dividend of $1.5 per share, The PNC Financial Services Group, Inc (PNC - Free Report) has a dividend yield of 3.68%. This is compared to the Banks - Major Regional industry's yield of 3.66% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 20%. Check The PNC Financial Services Group, Inc (PNC - 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.
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 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
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.