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

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

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.

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 the current rate is much lower.

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 can retirees do? You could dramatically reduce your expenses, and go out on a limb hoping your Social Security benefits don't diminish. On the other hand, you could opt for an alternative investment that gives a steady, higher-rate income stream to supplant lessening 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 low risk, low yielding Treasury and bond options.

Look for stocks that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions.

A rule of thumb for finding solid income-producing stocks is to seek those that average 3% dividend yield, and positive yearly dividend growth. These stocks can help combat inflation by boosting dividends over time.

Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.

Manulife Financial (MFC - Free Report) is currently shelling out a dividend of $0.27 per share, with a dividend yield of 5.66%. This compares to the Insurance - Life Insurance industry's yield of 0.05% and the S&P 500's yield of 1.76%. The company's annualized dividend growth in the past year was 5.62%. Check Manulife Financial (MFC - Free Report) dividend history here>>>

New Jersey Resources (NJR - Free Report) is paying out a dividend of $0.39 per share at the moment, with a dividend yield of 3.16% compared to the Utility - Gas Distribution industry's yield of 3.24% and the S&P 500's yield. The annualized dividend growth of the company was 7.59% over the past year. Check New Jersey Resources (NJR - Free Report) dividend history here>>>

Currently paying a dividend of $0.27 per share, Perrigo (PRGO - Free Report) has a dividend yield of 3.32%. This is compared to the Medical - Products industry's yield of 0% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 5%. Check Perrigo (PRGO - Free Report) 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 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 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

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.


See More Zacks Research for These Tickers


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


Manulife Financial Corp (MFC) - free report >>

Perrigo Company plc (PRGO) - free report >>

NewJersey Resources Corporation (NJR) - free report >>

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