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3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income
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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 many years, bonds or other fixed-income assets could produce the yield needed to provide solid income for retirement needs. However, these yields have dwindled over time: 10-year Treasury bond rates in the late 1990s were around 6.50%, but today, that rate is a thing of the past, with a slim likelihood of rates making a comeback in the foreseeable future.
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
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.
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.
Brookline Bancorp (BRKL - Free Report) is currently shelling out a dividend of $0.14 per share, with a dividend yield of 4.06%. This compares to the Financial - Savings and Loan industry's yield of 2.68% and the S&P 500's yield of 1.57%. The company's annualized dividend growth in the past year was 8%. Check Brookline Bancorp (BRKL - 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 3.3% compared to the Financial - Savings and Loan industry's yield of 2.68% 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 $0.13 per share, SB Financial Group, Inc. (SBFG - Free Report) has a dividend yield of 3.01%. This is compared to the Banks - Northeast industry's yield of 2.5% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 14.13%. Check SB Financial Group, Inc. (SBFG - 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.
Combating the impact of inflation is one advantage of owning these dividend-paying stocks. Here's why: many of these stable, high-quality companies increase their dividends over time, which translates to rising dividend income that offsets the effects of inflation.
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
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
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 many years, bonds or other fixed-income assets could produce the yield needed to provide solid income for retirement needs. However, these yields have dwindled over time: 10-year Treasury bond rates in the late 1990s were around 6.50%, but today, that rate is a thing of the past, with a slim likelihood of rates making a comeback in the foreseeable future.
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
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.
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.
Brookline Bancorp (BRKL - Free Report) is currently shelling out a dividend of $0.14 per share, with a dividend yield of 4.06%. This compares to the Financial - Savings and Loan industry's yield of 2.68% and the S&P 500's yield of 1.57%. The company's annualized dividend growth in the past year was 8%. Check Brookline Bancorp (BRKL - 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 3.3% compared to the Financial - Savings and Loan industry's yield of 2.68% 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 $0.13 per share, SB Financial Group, Inc. (SBFG - Free Report) has a dividend yield of 3.01%. This is compared to the Banks - Northeast industry's yield of 2.5% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 14.13%. Check SB Financial Group, Inc. (SBFG - 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.
Combating the impact of inflation is one advantage of owning these dividend-paying stocks. Here's why: many of these stable, high-quality companies increase their dividends over time, which translates to rising dividend income that offsets the effects of inflation.
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
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.