Yahoo Finance 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.
Your parents' retirement investing plan won't cut it today.
For example, 10-year Treasury bonds in the late 1990s offered a yield of around 6.50%, which translated to an income source you could count on. However, today's yield is much lower and probably not a viable return option to fund typical retirements.
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.
Today's retirees are getting hit hard by reduced bond yields - and the Social Security picture isn't too rosy either. Right now and for the near future, Social Security benefits are still being paid, but it has been estimated that the Social Security funds will be depleted as soon as 2035.
Unfortunately, it looks like the two traditional sources of retirement income - bonds and Social Security - may not be able to adequately meet the needs of present and future retirees. But what if there was another option that could provide a steady, reliable source of income in retirement?
Invest in Dividend Stocks
We feel that these dividend-paying equities - as long as they are from high-quality, low-risk issuers - can give retirement investors a smart option to replace low-yielding Treasury bonds (or other bonds).
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.
Urban Edge Properties (UE) is currently shelling out a dividend of $0.17 per share, with a dividend yield of 3.99%. This compares to the REIT and Equity Trust - Retail 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 6.25%. Check Urban Edge Properties (UE) dividend history here>>>
UGI (UGI) is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 6.14% compared to the Utility - Gas Distribution industry's yield of 3.27% and the S&P 500's yield. The annualized dividend growth of the company was 4.17% over the past year. Check UGI (UGI) dividend history here>>>
Currently paying a dividend of $0.43 per share, Unitil (UTL) has a dividend yield of 3.29%. This is compared to the Utility - Electric Power industry's yield of 3.56% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 4.94%. Check Unitil (UTL) 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.
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 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
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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Urban Edge Properties (UE) : Free Stock Analysis Report
UGI Corporation (UGI) : Free Stock Analysis Report
Unitil Corporation (UTL) : Free Stock Analysis Report
