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Improve Your Retirement Income with These 3 Top-Ranked Dividend Stocks
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Believe it or not, seniors fear running out of cash more than they fear dying.
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.
In today's economic environment, traditional income investments are not working.
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.
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.
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.
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
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.
Autoliv, Inc. (ALV - Free Report) is currently shelling out a dividend of $0.66 per share, with a dividend yield of 3%. This compares to the Automotive - Original Equipment industry's yield of 0% and the S&P 500's yield of 1.77%. The company's annualized dividend growth in the past year was 3.13%. Check Autoliv, Inc. (ALV - Free Report) dividend history here>>>
Berkshire Hills Bancorp (BHLB - Free Report) is paying out a dividend of $0.18 per share at the moment, with a dividend yield of 3.79% compared to the Financial - Savings and Loan industry's yield of 3.23% and the S&P 500's yield. The annualized dividend growth of the company was 50% over the past year. Check Berkshire Hills Bancorp (BHLB - Free Report) dividend history here>>>
Currently paying a dividend of $0.33 per share, Conagra Brands (CAG - Free Report) has a dividend yield of 3.59%. This is compared to the Food - Miscellaneous industry's yield of 0% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 5.6%. Check Conagra Brands (CAG - 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.
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 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
Seeking steady, consistent income through dividends can be a smart option for financial security in retirement, whether you invest in mutual funds, ETFs, or in dividend-paying stocks.
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Improve Your Retirement Income with These 3 Top-Ranked Dividend Stocks
Believe it or not, seniors fear running out of cash more than they fear dying.
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.
In today's economic environment, traditional income investments are not working.
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.
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.
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.
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
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.
Autoliv, Inc. (ALV - Free Report) is currently shelling out a dividend of $0.66 per share, with a dividend yield of 3%. This compares to the Automotive - Original Equipment industry's yield of 0% and the S&P 500's yield of 1.77%. The company's annualized dividend growth in the past year was 3.13%. Check Autoliv, Inc. (ALV - Free Report) dividend history here>>>
Berkshire Hills Bancorp (BHLB - Free Report) is paying out a dividend of $0.18 per share at the moment, with a dividend yield of 3.79% compared to the Financial - Savings and Loan industry's yield of 3.23% and the S&P 500's yield. The annualized dividend growth of the company was 50% over the past year. Check Berkshire Hills Bancorp (BHLB - Free Report) dividend history here>>>
Currently paying a dividend of $0.33 per share, Conagra Brands (CAG - Free Report) has a dividend yield of 3.59%. This is compared to the Food - Miscellaneous industry's yield of 0% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 5.6%. Check Conagra Brands (CAG - 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.
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 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
Seeking steady, consistent income through dividends can be a smart option for financial security in retirement, whether you invest in mutual funds, ETFs, or in dividend-paying stocks.