We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3 Top Dividend Stocks to Maximize Your Retirement Income - January 29, 2020
Read MoreHide Full Article
Here's an eye-opening statistic: older Americans are more afraid of running out of money than of death itself.
Also, retirees who have constructed a nest egg have valid justifications to be concerned, since the traditional ways to plan for retirement may mean income can no longer cover expenses. Some retirees are now tapping their principal to make a decent living, pressed for time between decreasing investment balances and longer life expectancies.
The tried - and - true retirement investing approach of yesterday doesn't work today.
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 at the time of this article, the current rate is under 2% and looks to stay low thanks to an accommodative Fed.
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.
Today's retirees are getting hit hard by reduced bond yields - and the Social Security picture isn't too rosy either. Right now and for the near future, Social Security benefits are still being paid, but it has been estimated that the Social Security funds will be depleted as soon as 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
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.
One way to identify suitable candidates is to look for stocks with an average dividend yield of 3%, and positive average annual dividend growth. Many stocks increase dividends over time, helping to offset the effects of inflation.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
The First of Long Island (FLIC - Free Report) is currently shelling out a dividend of $0.18 per share, with a dividend yield of 3.11%. This compares to the Banks - Northeast industry's yield of 1.76% and the S&P 500's yield of 1.8%. In terms of dividend growth, the company's current annualized dividend of $0.72 is up 5.88% from last year.
H&R Block (HRB - Free Report) is paying out a dividend of 0.26 per share at the moment, with a dividend yield of 4.38% compared to the Consumer Services - Miscellaneous industry's yield of 0% and the S&P 500's yield. Taking a look at the company's dividend growth, its current annualized dividend of $1.04 is up 4% from last year.
Currently paying a dividend of 0.23 per share, Interpublic Group (IPG - Free Report) has a dividend yield of 4.05%. This is compared to the Advertising and Marketing industry's yield of 0% and the S&P 500's current yield. Looking at dividend growth, the company's current annualized dividend of $0.94 is up 11.9% from last year.
But aren't stocks generally more risky than bonds?
The fact is that stocks, as an asset class, carry more risk than bonds. To counterbalance this, invest in superior quality dividend stocks that not only can grow over time but more significantly, can also decrease your overall portfolio volatility with respect to the broader stock market.
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.
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
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:
Image: Bigstock
3 Top Dividend Stocks to Maximize Your Retirement Income - January 29, 2020
Here's an eye-opening statistic: older Americans are more afraid of running out of money than of death itself.
Also, retirees who have constructed a nest egg have valid justifications to be concerned, since the traditional ways to plan for retirement may mean income can no longer cover expenses. Some retirees are now tapping their principal to make a decent living, pressed for time between decreasing investment balances and longer life expectancies.
The tried - and - true retirement investing approach of yesterday doesn't work today.
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 at the time of this article, the current rate is under 2% and looks to stay low thanks to an accommodative Fed.
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.
Today's retirees are getting hit hard by reduced bond yields - and the Social Security picture isn't too rosy either. Right now and for the near future, Social Security benefits are still being paid, but it has been estimated that the Social Security funds will be depleted as soon as 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
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.
One way to identify suitable candidates is to look for stocks with an average dividend yield of 3%, and positive average annual dividend growth. Many stocks increase dividends over time, helping to offset the effects of inflation.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
The First of Long Island (FLIC - Free Report) is currently shelling out a dividend of $0.18 per share, with a dividend yield of 3.11%. This compares to the Banks - Northeast industry's yield of 1.76% and the S&P 500's yield of 1.8%. In terms of dividend growth, the company's current annualized dividend of $0.72 is up 5.88% from last year.
H&R Block (HRB - Free Report) is paying out a dividend of 0.26 per share at the moment, with a dividend yield of 4.38% compared to the Consumer Services - Miscellaneous industry's yield of 0% and the S&P 500's yield. Taking a look at the company's dividend growth, its current annualized dividend of $1.04 is up 4% from last year.
Currently paying a dividend of 0.23 per share, Interpublic Group (IPG - Free Report) has a dividend yield of 4.05%. This is compared to the Advertising and Marketing industry's yield of 0% and the S&P 500's current yield. Looking at dividend growth, the company's current annualized dividend of $0.94 is up 11.9% from last year.
But aren't stocks generally more risky than bonds?
The fact is that stocks, as an asset class, carry more risk than bonds. To counterbalance this, invest in superior quality dividend stocks that not only can grow over time but more significantly, can also decrease your overall portfolio volatility with respect to the broader stock market.
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.
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
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