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3 Top Dividend Stocks to Maximize Your Retirement Income - December 16, 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.

In today's economic environment, traditional income investments are not working.

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 - currently under 2% and probably not a viable return option to fund typical retirements.

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.

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.

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

Dividend-paying stocks from low-risk, high-quality companies are a smart way to generate steady and reliable attractive income streams to replace current low risk, low yielding Treasury and bond options.

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.

Cheesecake Factory (CAKE - Free Report) is currently shelling out a dividend of $0.36 per share, with a dividend yield of 3.61%. This compares to the Retail - Restaurants industry's yield of 0% and the S&P 500's yield of 1.82%. In terms of dividend growth, the company's current annualized dividend of $1.44 is up 9.09% from last year.

CyrusOne (CONE - Free Report) is paying out a dividend of 0.5 per share at the moment, with a dividend yield of 3.27% 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 $2 is up 8.7% from last year.

Currently paying a dividend of 0.49 per share, NTT Docomo (DCMYY - Free Report) has a dividend yield of 3.56%. This is compared to the Wireless Non-US industry's yield of 2.36% and the S&P 500's current yield. Looking at dividend growth, the company's current annualized dividend of $0.98 is up 35.51% 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'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.

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:


The Cheesecake Factory Incorporated (CAKE) - free report >>

CyrusOne Inc (CONE) - free report >>

NTT DOCOMO, Inc (DCMYY) - free report >>

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