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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.
And older Americans have legitimate reasons for this worry, even if they have dutifully saved for their golden years. That's because the traditional ways people manage retirement may no longer provide enough income to meet expenses - and with people generally living longer, the principal retirement savings is exhausted far too early in the retirement period.
Retirement investing approaches of the past don'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 the current rate is much lower.
That means if you had $1 million in 10-year Treasuries, the difference in yield between 1999 and today is 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.
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 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.
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.
Alexandria Real Estate Equities (ARE - Free Report) is currently shelling out a dividend of $1.3 per share, with a dividend yield of 4.32%. This compares to the REIT and Equity Trust - Other industry's yield of 4.54% and the S&P 500's yield of 1.58%. The company's annualized dividend growth in the past year was 4.96%. Check Alexandria Real Estate Equities (ARE - Free Report) dividend history here>>>
NexPoint Residential Trust Inc. (NXRT - Free Report) is paying out a dividend of $0.46 per share at the moment, with a dividend yield of 4.95% compared to the REIT and Equity Trust - Residential industry's yield of 3.78% and the S&P 500's yield. The annualized dividend growth of the company was 10.1% over the past year. Check NexPoint Residential Trust Inc. (NXRT - Free Report) dividend history here>>>
Currently paying a dividend of $1.3 per share, Prudential (PRU - Free Report) has a dividend yield of 4.35%. This is compared to the Insurance - Multi line industry's yield of 1.84% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 4%. Check Prudential (PRU - Free Report) dividend history here>>>
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.
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
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.
And older Americans have legitimate reasons for this worry, even if they have dutifully saved for their golden years. That's because the traditional ways people manage retirement may no longer provide enough income to meet expenses - and with people generally living longer, the principal retirement savings is exhausted far too early in the retirement period.
Retirement investing approaches of the past don'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 the current rate is much lower.
That means if you had $1 million in 10-year Treasuries, the difference in yield between 1999 and today is 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.
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 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.
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.
Alexandria Real Estate Equities (ARE - Free Report) is currently shelling out a dividend of $1.3 per share, with a dividend yield of 4.32%. This compares to the REIT and Equity Trust - Other industry's yield of 4.54% and the S&P 500's yield of 1.58%. The company's annualized dividend growth in the past year was 4.96%. Check Alexandria Real Estate Equities (ARE - Free Report) dividend history here>>>
NexPoint Residential Trust Inc. (NXRT - Free Report) is paying out a dividend of $0.46 per share at the moment, with a dividend yield of 4.95% compared to the REIT and Equity Trust - Residential industry's yield of 3.78% and the S&P 500's yield. The annualized dividend growth of the company was 10.1% over the past year. Check NexPoint Residential Trust Inc. (NXRT - Free Report) dividend history here>>>
Currently paying a dividend of $1.3 per share, Prudential (PRU - Free Report) has a dividend yield of 4.35%. This is compared to the Insurance - Multi line industry's yield of 1.84% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 4%. Check Prudential (PRU - Free Report) dividend history here>>>
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.
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
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.