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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 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.
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.
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.
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 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.
A rule of thumb for finding solid income-producing stocks is to seek those that average 3% dividend yield, and positive yearly dividend growth. These stocks can help combat inflation by boosting dividends over time.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
Camden (CPT - Free Report) is currently shelling out a dividend of $1 per share, with a dividend yield of 4.15%. This compares to the REIT and Equity Trust - Residential industry's yield of 4.31% and the S&P 500's yield of 1.71%. The company's annualized dividend growth in the past year was 6.38%. Check Camden (CPT - Free Report) dividend history here>>>
Preferred Bank (PFBC - Free Report) is paying out a dividend of $0.55 per share at the moment, with a dividend yield of 3.53% compared to the Banks - West industry's yield of 3.1% and the S&P 500's yield. The annualized dividend growth of the company was 27.91% over the past year. Check Preferred Bank (PFBC - Free Report) dividend history here>>>
Currently paying a dividend of $0.26 per share, Tanger Factory Outlet (SKT - Free Report) has a dividend yield of 4.26%. This is compared to the REIT and Equity Trust - Retail industry's yield of 5.11% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 22.5%. Check Tanger Factory Outlet (SKT - 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 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 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 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.
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.
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.
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 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.
A rule of thumb for finding solid income-producing stocks is to seek those that average 3% dividend yield, and positive yearly dividend growth. These stocks can help combat inflation by boosting dividends over time.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
Camden (CPT - Free Report) is currently shelling out a dividend of $1 per share, with a dividend yield of 4.15%. This compares to the REIT and Equity Trust - Residential industry's yield of 4.31% and the S&P 500's yield of 1.71%. The company's annualized dividend growth in the past year was 6.38%. Check Camden (CPT - Free Report) dividend history here>>>
Preferred Bank (PFBC - Free Report) is paying out a dividend of $0.55 per share at the moment, with a dividend yield of 3.53% compared to the Banks - West industry's yield of 3.1% and the S&P 500's yield. The annualized dividend growth of the company was 27.91% over the past year. Check Preferred Bank (PFBC - Free Report) dividend history here>>>
Currently paying a dividend of $0.26 per share, Tanger Factory Outlet (SKT - Free Report) has a dividend yield of 4.26%. This is compared to the REIT and Equity Trust - Retail industry's yield of 5.11% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 22.5%. Check Tanger Factory Outlet (SKT - 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 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 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.