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3 Top Dividend Stocks to Maximize Your Retirement Income
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Strange but true: seniors fear death less than running out of money in retirement.
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.
In today's economic environment, traditional income investments are not working.
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 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.
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.
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.
is currently shelling out a dividend of $0.27 per share, with a dividend yield of 3.89%. This compares to the REIT and Equity Trust - Retail industry's yield of 3.72% and the S&P 500's yield of 1.59%. The company's annualized dividend growth in the past year was 4.81%. Check Brixmor Property dividend history here>>>
is paying out a dividend of $0.3 per share at the moment, with a dividend yield of 3.92% compared to the REIT and Equity Trust - Other industry's yield of 4.16% and the S&P 500's yield. The annualized dividend growth of the company was 3.51% over the past year. Check COPT Defense dividend history here>>>
has a dividend yield of 3.87%. This is compared to the Banks - Southeast industry's yield of 2.16% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 4.55%. Check Community Trust Bancorp dividend history here>>>
But aren't stocks generally more risky than bonds?
Overall, that is true. But stocks are a broad class, and you can reduce the risks significantly by selecting high-quality dividend stocks that can generate regular, predictable income and can also decrease the volatility of your portfolio compared to the overall stock market.
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.
If you prefer investing in funds or ETFs compared to individual stocks, you can still pursue a dividend income strategy. However, it's important to know the fees charged by each fund or ETF, which can ultimately reduce your dividend income, working against your strategy. Do your homework and make sure you know the fees charged by any fund before you invest.
Bottom Line
Regardless of whether you select high-quality, low-fee funds or stocks, looking for a steady stream of income from dividend-paying equities can potentially lead you to a solid and more peaceful retirement.
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3 Top Dividend Stocks to Maximize Your Retirement Income
Strange but true: seniors fear death less than running out of money in retirement.
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.
In today's economic environment, traditional income investments are not working.
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 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.
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.
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.
Brixmor Property (BRX - Free Report)
is currently shelling out a dividend of $0.27 per share, with a dividend yield of 3.89%. This compares to the REIT and Equity Trust - Retail industry's yield of 3.72% and the S&P 500's yield of 1.59%. The company's annualized dividend growth in the past year was 4.81%. Check Brixmor Property dividend history here>>>COPT Defense (CDP - Free Report)
is paying out a dividend of $0.3 per share at the moment, with a dividend yield of 3.92% compared to the REIT and Equity Trust - Other industry's yield of 4.16% and the S&P 500's yield. The annualized dividend growth of the company was 3.51% over the past year. Check COPT Defense dividend history here>>>Currently paying a dividend of $0.47 per share,
Community Trust Bancorp (CTBI - Free Report)
has a dividend yield of 3.87%. This is compared to the Banks - Southeast industry's yield of 2.16% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 4.55%. Check Community Trust Bancorp dividend history here>>>But aren't stocks generally more risky than bonds?
Overall, that is true. But stocks are a broad class, and you can reduce the risks significantly by selecting high-quality dividend stocks that can generate regular, predictable income and can also decrease the volatility of your portfolio compared to the overall stock market.
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.
If you prefer investing in funds or ETFs compared to individual stocks, you can still pursue a dividend income strategy. However, it's important to know the fees charged by each fund or ETF, which can ultimately reduce your dividend income, working against your strategy. Do your homework and make sure you know the fees charged by any fund before you invest.
Bottom Line
Regardless of whether you select high-quality, low-fee funds or stocks, looking for a steady stream of income from dividend-paying equities can potentially lead you to a solid and more peaceful retirement.