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3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income
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Here's an eye-opening statistic: older Americans are more afraid of running out of money than of death itself.
And unfortunately, even retirees who have built a nest egg have good reason to be concerned - with the traditional approaches to retirement planning, income may no longer cover expenses. That means retirees are dipping into principal to make ends meet, setting up a race against time between dwindling investment balances and longer lifespans.
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.
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.
Unfortunately, it looks like the two traditional sources of retirement income - bonds and Social Security - may not be able to adequately meet the needs of present and future retirees. But what if there was another option that could provide a steady, reliable source of income in retirement?
Invest in Dividend Stocks
As we see it, dividend-paying stocks from generally low-risk, top notch companies are a brilliant way to create steady and solid income streams to supplant low risk, low yielding Treasury and fixed-income alternatives.
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.
Axis Capital (AXS - Free Report) is currently shelling out a dividend of $0.44 per share, with a dividend yield of 3.25%. This compares to the Insurance - Property and Casualty industry's yield of 0.8% and the S&P 500's yield of 1.68%. The company's annualized dividend growth in the past year was 2.38%. Check Axis Capital (AXS - Free Report) dividend history here>>>
Brixmor Property (BRX - Free Report) is paying out a dividend of $0.26 per share at the moment, with a dividend yield of 4.23% compared to the REIT and Equity Trust - Retail industry's yield of 4.34% and the S&P 500's yield. The annualized dividend growth of the company was 11.63% over the past year. Check Brixmor Property (BRX - Free Report) dividend history here>>>
Currently paying a dividend of $0.27 per share, Comcast (CMCSA - Free Report) has a dividend yield of 3.09%. This is compared to the Cable Television industry's yield of 0% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 8%. Check Comcast (CMCSA - 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.
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
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.
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3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income
Here's an eye-opening statistic: older Americans are more afraid of running out of money than of death itself.
And unfortunately, even retirees who have built a nest egg have good reason to be concerned - with the traditional approaches to retirement planning, income may no longer cover expenses. That means retirees are dipping into principal to make ends meet, setting up a race against time between dwindling investment balances and longer lifespans.
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.
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.
Unfortunately, it looks like the two traditional sources of retirement income - bonds and Social Security - may not be able to adequately meet the needs of present and future retirees. But what if there was another option that could provide a steady, reliable source of income in retirement?
Invest in Dividend Stocks
As we see it, dividend-paying stocks from generally low-risk, top notch companies are a brilliant way to create steady and solid income streams to supplant low risk, low yielding Treasury and fixed-income alternatives.
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.
Axis Capital (AXS - Free Report) is currently shelling out a dividend of $0.44 per share, with a dividend yield of 3.25%. This compares to the Insurance - Property and Casualty industry's yield of 0.8% and the S&P 500's yield of 1.68%. The company's annualized dividend growth in the past year was 2.38%. Check Axis Capital (AXS - Free Report) dividend history here>>>
Brixmor Property (BRX - Free Report) is paying out a dividend of $0.26 per share at the moment, with a dividend yield of 4.23% compared to the REIT and Equity Trust - Retail industry's yield of 4.34% and the S&P 500's yield. The annualized dividend growth of the company was 11.63% over the past year. Check Brixmor Property (BRX - Free Report) dividend history here>>>
Currently paying a dividend of $0.27 per share, Comcast (CMCSA - Free Report) has a dividend yield of 3.09%. This is compared to the Cable Television industry's yield of 0% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 8%. Check Comcast (CMCSA - 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.
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
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.