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How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks
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Strange but true: seniors fear death less than running out of money in retirement.
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.
Years ago, investors at or close to retirement could put money into fixed-income assets and depend on appealing yields to generate consistent, solid pay streams to fund a comfortable retirement. 10-year Treasury bond rates in the late 1990s floated around 6.50%, but unfortunately, those days of being able to exclusively rely on Treasury yields to fund retirement income are over.
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.
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
As a replacement for low yielding Treasury bonds (and other bond options), we believe dividend-paying stocks from high quality companies offer low risk and stable, predictable income investors in retirement seek.
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.
Comcast (CMCSA - Free Report) is currently shelling out a dividend of $0.31 per share, with a dividend yield of 3.22%. This compares to the Cable Television industry's yield of 0% and the S&P 500's yield of 1.59%. The company's annualized dividend growth in the past year was 6.9%. Check Comcast dividend history here>>>
Peoples Bancorp (PEBO - Free Report) is paying out a dividend of $0.4 per share at the moment, with a dividend yield of 4.76% compared to the Banks - Midwest industry's yield of 2.65% and the S&P 500's yield. The annualized dividend growth of the company was 2.56% over the past year. Check Peoples Bancorp dividend history here>>>
Currently paying a dividend of $0.28 per share, Tanger (SKT - Free Report) has a dividend yield of 3.79%. This is compared to the REIT and Equity Trust - Retail industry's yield of 4.06% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 12.24%. Check Tanger 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.
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.
You may be thinking, "I like this dividend strategy, but instead of investing in individual stocks, I'm going to find a dividend-focused mutual fund or ETF." This approach can make sense, but be aware that some mutual funds and specialized ETFs carry high fees, which may reduce your dividend gains or income, and defeat the goal of this dividend investment approach. If you do wish to invest in a fund, do your research to find the best-quality dividend funds with the lowest fees.
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.
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How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks
Strange but true: seniors fear death less than running out of money in retirement.
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.
Years ago, investors at or close to retirement could put money into fixed-income assets and depend on appealing yields to generate consistent, solid pay streams to fund a comfortable retirement. 10-year Treasury bond rates in the late 1990s floated around 6.50%, but unfortunately, those days of being able to exclusively rely on Treasury yields to fund retirement income are over.
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.
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
As a replacement for low yielding Treasury bonds (and other bond options), we believe dividend-paying stocks from high quality companies offer low risk and stable, predictable income investors in retirement seek.
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.
Comcast (CMCSA - Free Report) is currently shelling out a dividend of $0.31 per share, with a dividend yield of 3.22%. This compares to the Cable Television industry's yield of 0% and the S&P 500's yield of 1.59%. The company's annualized dividend growth in the past year was 6.9%. Check Comcast dividend history here>>>
Peoples Bancorp (PEBO - Free Report) is paying out a dividend of $0.4 per share at the moment, with a dividend yield of 4.76% compared to the Banks - Midwest industry's yield of 2.65% and the S&P 500's yield. The annualized dividend growth of the company was 2.56% over the past year. Check Peoples Bancorp dividend history here>>>
Currently paying a dividend of $0.28 per share, Tanger (SKT - Free Report) has a dividend yield of 3.79%. This is compared to the REIT and Equity Trust - Retail industry's yield of 4.06% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 12.24%. Check Tanger 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.
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.
You may be thinking, "I like this dividend strategy, but instead of investing in individual stocks, I'm going to find a dividend-focused mutual fund or ETF." This approach can make sense, but be aware that some mutual funds and specialized ETFs carry high fees, which may reduce your dividend gains or income, and defeat the goal of this dividend investment approach. If you do wish to invest in a fund, do your research to find the best-quality dividend funds with the lowest fees.
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.