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3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income
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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.
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.
And lower bond yields aren't the only potential problem seniors are facing. Today's retirees aren't feeling as secure as they once did about Social Security, either. Benefit checks will still be coming for the foreseeable future, but based on current estimates, Social Security funds will run out of money in 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
We feel that these dividend-paying equities - as long as they are from high-quality, low-risk issuers - can give retirement investors a smart option to replace low-yielding Treasury bonds (or other bonds).
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.
Amgen (AMGN - Free Report) is currently shelling out a dividend of $2.25 per share, with a dividend yield of 3.03%. This compares to the Medical - Biomedical and Genetics industry's yield of 0% and the S&P 500's yield of 1.65%. The company's annualized dividend growth in the past year was 9.79%. Check Amgen (AMGN - Free Report) dividend history here>>>
Banco Itau (ITUB - Free Report) is paying out a dividend of $0.04 per share at the moment, with a dividend yield of 6.84% compared to the Banks - Foreign industry's yield of 4.05% and the S&P 500's yield. The annualized dividend growth of the company was 549.69% over the past year. Check Banco Itau (ITUB - Free Report) dividend history here>>>
Currently paying a dividend of $1.1 per share, Ryman Hospitality Properties (RHP - Free Report) has a dividend yield of 3.68%. This is compared to the REIT and Equity Trust - Other industry's yield of 3.96% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 900%. Check Ryman Hospitality Properties (RHP - 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.
You may be thinking, "I like this dividend strategy, but instead of investing in individual stocks, I'm going to find a dividend-focused mutual fund or ETF." This approach can make sense, but be aware that some mutual funds and specialized ETFs carry high fees, which may reduce your dividend gains or income, and defeat the goal of this dividend investment approach. If you do wish to invest in a fund, do your research to find the best-quality dividend funds with the lowest fees.
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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3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income
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.
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.
And lower bond yields aren't the only potential problem seniors are facing. Today's retirees aren't feeling as secure as they once did about Social Security, either. Benefit checks will still be coming for the foreseeable future, but based on current estimates, Social Security funds will run out of money in 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
We feel that these dividend-paying equities - as long as they are from high-quality, low-risk issuers - can give retirement investors a smart option to replace low-yielding Treasury bonds (or other bonds).
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.
Amgen (AMGN - Free Report) is currently shelling out a dividend of $2.25 per share, with a dividend yield of 3.03%. This compares to the Medical - Biomedical and Genetics industry's yield of 0% and the S&P 500's yield of 1.65%. The company's annualized dividend growth in the past year was 9.79%. Check Amgen (AMGN - Free Report) dividend history here>>>
Banco Itau (ITUB - Free Report) is paying out a dividend of $0.04 per share at the moment, with a dividend yield of 6.84% compared to the Banks - Foreign industry's yield of 4.05% and the S&P 500's yield. The annualized dividend growth of the company was 549.69% over the past year. Check Banco Itau (ITUB - Free Report) dividend history here>>>
Currently paying a dividend of $1.1 per share, Ryman Hospitality Properties (RHP - Free Report) has a dividend yield of 3.68%. This is compared to the REIT and Equity Trust - Other industry's yield of 3.96% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 900%. Check Ryman Hospitality Properties (RHP - 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.
You may be thinking, "I like this dividend strategy, but instead of investing in individual stocks, I'm going to find a dividend-focused mutual fund or ETF." This approach can make sense, but be aware that some mutual funds and specialized ETFs carry high fees, which may reduce your dividend gains or income, and defeat the goal of this dividend investment approach. If you do wish to invest in a fund, do your research to find the best-quality dividend funds with the lowest fees.
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.