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Improve Your Retirement Income with These 3 Top-Ranked Dividend Stocks - December 06, 2019

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Strange but true: seniors fear death less than running out of money in retirement.

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.

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.

The impact of this rate decline is sizeable: 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.

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).

For example, AT&T and Coca-Cola are income stocks with attractive dividend yields of 3% or better. Look for stocks like this 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.

Canadian Imperial Bank (CM - Free Report) is currently shelling out a dividend of $1.08 per share, with a dividend yield of 5.24%. This compares to the Banks - Foreign industry's yield of 3.27% and the S&P 500's yield of 1.83%. In terms of dividend growth, the company's current annualized dividend of $4.33 is up 3.73% from last year.

Ryman Hospitality Properties (RHP - Free Report) is paying out a dividend of 0.9 per share at the moment, with a dividend yield of 4.06% compared to the REIT and Equity Trust - Other industry's yield of 4.09% and the S&P 500's yield. Taking a look at the company's dividend growth, its current annualized dividend of $3.6 is up 5.88% from last year.

Currently paying a dividend of 0.14 per share, Steelcase has a dividend yield of 3.15%. This is compared to the Business - Office Products industry's yield of 2.41% and the S&P 500's current yield. Looking at dividend growth, the company's current annualized dividend of $0.58 is up 7.41% from last year.

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 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 prefer investing in funds or ETFs compared to individual stocks, you can still pursue a dividend income strategy. However, it's important to know the fees charged by each fund or ETF, which can ultimately reduce your dividend income, working against your strategy. Do your homework and make sure you know the fees charged by any fund before you invest.

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.

Generating income is just one aspect of planning for a comfortable retirement.

To learn more ways to maximize your assets - and avoid pitfalls that could jeopardize your financial security - download our free report:

Will You Retire a Multi-Millionaire? 7 Things You Can Do Now


In-Depth Zacks Research for the Tickers Above


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


Canadian Imperial Bank of Commerce (CM) - free report >>

Ryman Hospitality Properties, Inc. (RHP) - free report >>

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