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How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks
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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 retirees have good reason to be worried about making their assets last. People are living longer, so that money has to cover a longer period. Making matters worse, income generated using tried-and-true retirement planning approaches may not cover expenses these days. That means seniors must dip into principal to meet living expenses.
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 impact of this rate decline is sizable: over 20 years, the difference in yield for a $1 million investment in 10-year Treasuries is 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.
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.
MetLife (MET - Free Report) is currently shelling out a dividend of $0.5 per share, with a dividend yield of 3.09%. This compares to the Insurance - Multi line industry's yield of 2.03% and the S&P 500's yield of 1.7%. The company's annualized dividend growth in the past year was 4.17%. Check MetLife (MET - Free Report) dividend history here>>>
Magic Software (MGIC - Free Report) is paying out a dividend of $0.23 per share at the moment, with a dividend yield of 4.02% compared to the Computer - Software industry's yield of 0% and the S&P 500's yield. The annualized dividend growth of the company was 23.93% over the past year. Check Magic Software (MGIC - Free Report) dividend history here>>>
Currently paying a dividend of $0.63 per share, State Street Corporation (STT - Free Report) has a dividend yield of 3.04%. This is compared to the Banks - Major Regional industry's yield of 3.89% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 10.53%. Check State Street Corporation (STT - 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.
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 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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How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks
Here's an eye-opening statistic: older Americans are more afraid of running out of money than of death itself.
And retirees have good reason to be worried about making their assets last. People are living longer, so that money has to cover a longer period. Making matters worse, income generated using tried-and-true retirement planning approaches may not cover expenses these days. That means seniors must dip into principal to meet living expenses.
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 impact of this rate decline is sizable: over 20 years, the difference in yield for a $1 million investment in 10-year Treasuries is 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.
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.
MetLife (MET - Free Report) is currently shelling out a dividend of $0.5 per share, with a dividend yield of 3.09%. This compares to the Insurance - Multi line industry's yield of 2.03% and the S&P 500's yield of 1.7%. The company's annualized dividend growth in the past year was 4.17%. Check MetLife (MET - Free Report) dividend history here>>>
Magic Software (MGIC - Free Report) is paying out a dividend of $0.23 per share at the moment, with a dividend yield of 4.02% compared to the Computer - Software industry's yield of 0% and the S&P 500's yield. The annualized dividend growth of the company was 23.93% over the past year. Check Magic Software (MGIC - Free Report) dividend history here>>>
Currently paying a dividend of $0.63 per share, State Street Corporation (STT - Free Report) has a dividend yield of 3.04%. This is compared to the Banks - Major Regional industry's yield of 3.89% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 10.53%. Check State Street Corporation (STT - 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.
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 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.