Improve Your Retirement Income with These 3 Top-Ranked Dividend Stocks - June 18, 2020
Strange but true: seniors fear death less than retirement money.
And pensioners have good reason to be concerned that their wealth will last. People live longer, so the money has to cover a longer period of time. To make matters worse, income that is generated using proven approaches to retirement provision may no longer cover expenses these days. This means that seniors have to immerse themselves in the headmaster to cover the cost of living.
Past investment approaches no longer work today.
Years ago, investors who were about to retire or were about to retire could invest money in fixed income assets and rely on attractive returns to achieve consistent, solid remuneration flows for comfortable retirement. Interest rates on 10-year government bonds were 6.50% at the end of the 1990s, but unfortunately, the days when you could only rely on government bond yields to fund retirement income were over.
This reduction in yields may not seem drastic, but it does add up: for an investment of $ 1 million in 10-year government bonds, the fall in interest rates means a yield differential of more than $ 1 million.
Today's retirees are hit hard by reduced bond yields - and the social security picture isn't too rosy either. Social security benefits are still being paid at present and for the near future, but it is estimated that social security funds will be used up by 2035.
So what can pensioners do? You could drastically cut your expenses and get on your nerves hoping that your social security benefits won't decrease. On the other hand, you could opt for an alternative investment that offers a steady, higher-income stream of income to replace the falling bond yields.
Invest in dividend stocks
Low-risk, high-quality, dividend-paying stocks are a smart way to generate stable and reliable, attractive income streams to replace current low-risk, low-yield treasury and bond options.
For example, AT&T and Coca-Cola are earnings stocks with attractive dividend yields of 3% or better. Look for stocks like this that have been paying steadily increasing dividends for years (or decades) and have not lowered their dividends even during recessions.
One way to identify suitable candidates is to look for stocks with an average dividend yield of 3% and positive average annual dividend growth. Many stocks increase dividends over time, helping offset the effects of inflation.
Here are three dividend-paying stocks that retirees should consider for their nest egg portfolio.
Bristol-Myers Squibb (BMY) is currently paying a dividend of $ 0.45 per share with a dividend yield of 3.16%. This compares to a return of 2.84% for the large cap pharmaceuticals industry and a return for the S&P 500 of 1.92%. In terms of dividend growth, the company's current annualized dividend of $ 1.8 rose 9.76% year over year.
Sempra (SRE) is currently paying a dividend of 1.04 per share, with a dividend yield of 3.37% compared to the return on the utilities - gas distribution industry of 3.37% and the return on the S&P 500. Looking at dividend growth the company’s current annualized dividend of $ 4.18 increased 8.01% year over year.
Seagate (STX) currently pays a dividend of 0.65 per share and has a dividend yield of 5.1%. This is compared to the 0% return on the computer storage devices industry and the current return on the S&P 500. In terms of dividend growth, the company's current annualized dividend of $ 2.6 is up 3.17% year over year.
But aren't stocks generally riskier than bonds?
It is true that stocks as an asset class have a higher risk than bonds, but high-quality dividend stocks can not only achieve earnings growth over time, but above all reduce the volatility of your entire portfolio compared to the broader stocks market.
Combating the effects of inflation is an advantage of owning these dividend-paying stocks. Here's why: Many of these stable, high-quality companies increase their dividends over time, which translates into rising dividend earnings that offset the effects of inflation.
Are you thinking about dividend-oriented mutual funds or ETFs? Pay attention to fees.
You may think, "I like this dividend strategy, but instead of investing in individual stocks, I will find a dividend-oriented mutual fund or ETF." This approach can be useful. However, be aware that some mutual funds and specialized ETFs charge high fees that can reduce your dividend profits or income and miss the target of this dividend investment approach. If you want to invest in a fund, do your research to find the best dividend funds with the lowest fees.
Regardless of whether you choose high-quality, low-cost funds or stocks, finding a steady income from dividend-paying stocks may offer you a way to better and stress-free retirement.
Income generation is just one aspect of planning a comfortable retirement.
Download our free report to learn more about how to maximize your wealth and avoid pitfalls that could threaten your financial security:
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