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How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks
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Strange but true: seniors fear death less than running out of money in retirement.
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.
Your parents' retirement investing plan won't cut it 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 effect of this drop in rates is substantial: over 20 years, the change in yield for a $1 million investment in 10-year Treasuries is over $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 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.
Grupo Aval Acciones y Valores S.A. (AVAL - Free Report) is currently shelling out a dividend of $0.01 per share, with a dividend yield of 3.18%. This compares to the Financial - Investment Management industry's yield of 1.74% and the S&P 500's yield of 1.34%. The company's annualized dividend growth in the past year was 12.92%. Check Grupo Aval Acciones y Valores S.A. dividend history here>>>
Amdocs (DOX) is paying out a dividend of $0.57 per share at the moment, with a dividend yield of 4.37% compared to the Computers - IT Services industry's yield of 0% and the S&P 500's yield. The annualized dividend growth of the company was 10.02% over the past year. Check Amdocs dividend history here>>>
Currently paying a dividend of $0.32 per share, Alpine Income (PINE) has a dividend yield of 5.86%. This is compared to the REIT and Equity Trust - Other industry's yield of 3.77% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 3.64%. Check Alpine Income 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 interested in investing in dividends, but are thinking about mutual funds or ETFs rather than stocks, beware of fees. Mutual funds and specialized ETFs may carry high fees, which could lower the overall gains you earn from dividends, undercutting your dividend income strategy. Be sure to look for funds with low fees if you decide on this approach.
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.
View the Zacks #1 Rank List
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How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks
Strange but true: seniors fear death less than running out of money in retirement.
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.
Your parents' retirement investing plan won't cut it 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 effect of this drop in rates is substantial: over 20 years, the change in yield for a $1 million investment in 10-year Treasuries is over $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 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.
Grupo Aval Acciones y Valores S.A. (AVAL - Free Report) is currently shelling out a dividend of $0.01 per share, with a dividend yield of 3.18%. This compares to the Financial - Investment Management industry's yield of 1.74% and the S&P 500's yield of 1.34%. The company's annualized dividend growth in the past year was 12.92%. Check Grupo Aval Acciones y Valores S.A. dividend history here>>>
Amdocs (DOX) is paying out a dividend of $0.57 per share at the moment, with a dividend yield of 4.37% compared to the Computers - IT Services industry's yield of 0% and the S&P 500's yield. The annualized dividend growth of the company was 10.02% over the past year. Check Amdocs dividend history here>>>
Currently paying a dividend of $0.32 per share, Alpine Income (PINE) has a dividend yield of 5.86%. This is compared to the REIT and Equity Trust - Other industry's yield of 3.77% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 3.64%. Check Alpine Income 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 interested in investing in dividends, but are thinking about mutual funds or ETFs rather than stocks, beware of fees. Mutual funds and specialized ETFs may carry high fees, which could lower the overall gains you earn from dividends, undercutting your dividend income strategy. Be sure to look for funds with low fees if you decide on this approach.
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.