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How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks
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Believe it or not, seniors fear running out of cash more than they fear dying.
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.
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.
The impact of this rate decline is sizable: 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
As we see it, dividend-paying stocks from generally low-risk, top notch companies are a brilliant way to create steady and solid income streams to supplant low risk, low yielding Treasury and fixed-income alternatives.
Look for stocks 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.
American Assets Trust (AAT - Free Report) is currently shelling out a dividend of $0.33 per share, with a dividend yield of 6.14%. This compares to the REIT and Equity Trust - Retail industry's yield of 4.47% and the S&P 500's yield of 1.69%. The company's annualized dividend growth in the past year was 3.13%. Check American Assets Trust (AAT - Free Report) dividend history here>>>
Bank of America (BAC - Free Report) is paying out a dividend of $0.24 per share at the moment, with a dividend yield of 3.1% compared to the Banks - Major Regional industry's yield of 3.92% and the S&P 500's yield. The annualized dividend growth of the company was 9.09% over the past year. Check Bank of America (BAC - Free Report) dividend history here>>>
Currently paying a dividend of $0.27 per share, Brixmor Property (BRX - Free Report) has a dividend yield of 4.58%. This is compared to the REIT and Equity Trust - Retail industry's yield of 4.47% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 8.33%. Check Brixmor Property (BRX - Free Report) dividend history here>>>
But aren't stocks generally more risky than bonds?
Yes, that's true. As a broad category, bonds carry less risk than stocks. However, the stocks we are talking about - dividend -paying stocks from high-quality companies - can generate income over time and also mitigate the overall volatility of your portfolio compared to the stock market as a whole.
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 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
Whether you select high-quality, low-fee funds or stocks, seeking the steady income of dividend-paying equities can potentially offer you a path to a better and more stress-free retirement.
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How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks
Believe it or not, seniors fear running out of cash more than they fear dying.
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.
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.
The impact of this rate decline is sizable: 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
As we see it, dividend-paying stocks from generally low-risk, top notch companies are a brilliant way to create steady and solid income streams to supplant low risk, low yielding Treasury and fixed-income alternatives.
Look for stocks 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.
American Assets Trust (AAT - Free Report) is currently shelling out a dividend of $0.33 per share, with a dividend yield of 6.14%. This compares to the REIT and Equity Trust - Retail industry's yield of 4.47% and the S&P 500's yield of 1.69%. The company's annualized dividend growth in the past year was 3.13%. Check American Assets Trust (AAT - Free Report) dividend history here>>>
Bank of America (BAC - Free Report) is paying out a dividend of $0.24 per share at the moment, with a dividend yield of 3.1% compared to the Banks - Major Regional industry's yield of 3.92% and the S&P 500's yield. The annualized dividend growth of the company was 9.09% over the past year. Check Bank of America (BAC - Free Report) dividend history here>>>
Currently paying a dividend of $0.27 per share, Brixmor Property (BRX - Free Report) has a dividend yield of 4.58%. This is compared to the REIT and Equity Trust - Retail industry's yield of 4.47% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 8.33%. Check Brixmor Property (BRX - Free Report) dividend history here>>>
But aren't stocks generally more risky than bonds?
Yes, that's true. As a broad category, bonds carry less risk than stocks. However, the stocks we are talking about - dividend -paying stocks from high-quality companies - can generate income over time and also mitigate the overall volatility of your portfolio compared to the stock market as a whole.
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 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
Whether you select high-quality, low-fee funds or stocks, seeking the steady income of dividend-paying equities can potentially offer you a path to a better and more stress-free retirement.