Back to top

Image: Bigstock

How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks

Read MoreHide Full Article

Here's a revealing data point: older Americans are scared more of outliving wealth 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.

Years ago, investors at or close to retirement could put money into fixed-income assets and depend on appealing yields to generate consistent, solid pay streams to fund a comfortable retirement. 10-year Treasury bond rates in the late 1990s floated around 6.50%, but unfortunately, those days of being able to exclusively rely on Treasury yields to fund retirement income are over.

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

As a replacement for low yielding Treasury bonds (and other bond options), we believe dividend-paying stocks from high quality companies offer low risk and stable, predictable income investors in retirement seek.

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.

Akzo Nobel NV (AKZOY - Free Report)

is currently shelling out a dividend of $0.44 per share, with a dividend yield of 4.16%. This compares to the Chemical - Diversified industry's yield of 2.02% and the S&P 500's yield of 1.63%. The company's annualized dividend growth in the past year was 0.94%. Check Akzo Nobel NV dividend history here>>>

Associated Banc-Corp (ASB - Free Report)

is paying out a dividend of $0.23 per share at the moment, with a dividend yield of 4.17% compared to the Banks - Midwest industry's yield of 2.79% and the S&P 500's yield. The annualized dividend growth of the company was 4.55% over the past year. Check Associated Banc-Corp dividend history here>>>

Currently paying a dividend of $0.46 per share,

Community Financial System (CBU - Free Report)

has a dividend yield of 3.37%. This is compared to the Financial - Miscellaneous Services industry's yield of 0% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 2.22%. Check Community Financial System 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.

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

Pursuing a dividend investing strategy can help protect your retirement portfolio. Whether you choose to invest in stocks or through low-fee mutual funds or ETFs, this approach can potentially help you achieve a more secure and enjoyable retirement.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Community Financial System, Inc. (CBU) - free report >>

Akzo Nobel NV (AKZOY) - free report >>

Associated Banc-Corp (ASB) - free report >>

Published in