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3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income

·4 min read

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.

In today's economic environment, traditional income investments are not working.

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 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.

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.

So what's a retiree to do? You could cut your expenses to the bone, and take the risk that your Social Security checks don't shrink. Or you could find an alternative investment that provides a steady, higher-rate income stream to replace dwindling bond yields.

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.

Greif (GEF) is currently shelling out a dividend of $0.5 per share, with a dividend yield of 3.03%. This compares to the Containers - Paper and Packaging industry's yield of 2.12% and the S&P 500's yield of 1.68%. The company's annualized dividend growth in the past year was 4.55%. Check Greif (GEF) dividend history here>>>

Paramount Group (PGRE) is paying out a dividend of $0.08 per share at the moment, with a dividend yield of 4.52% compared to the REIT and Equity Trust - Other industry's yield of 4.06% and the S&P 500's yield. The annualized dividend growth of the company was 10.71% over the past year. Check Paramount Group (PGRE) dividend history here>>>

Currently paying a dividend of $0.13 per share, RPT Realty (RPT) has a dividend yield of 5.7%. This is compared to the REIT and Equity Trust - Residential industry's yield of 3.08% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 73.33%. Check RPT Realty (RPT) 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.

A silver lining to owning dividend stocks for your retirement portfolio is that many companies, especially blue chip stocks, increase their dividends over time, helping offset the effects of inflation on your potential retirement income.

Thinking about dividend-focused mutual funds or ETFs? Watch out for fees.

If you're thinking, "I want to invest in a dividend-focused ETF or mutual fund," make sure to do your homework. It's important to know that some mutual funds and specialized ETFs charge high fees, which may diminish your dividend gains or income and thwart the overall objective of this investment strategy. If you do want to invest in fund, research well to identify the best-quality dividend funds with the least charges.

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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Greif, Inc. (GEF) : Free Stock Analysis Report
 
RPT Realty (RPT) : Free Stock Analysis Report
 
Paramount Group, Inc. (PGRE) : Free Stock Analysis Report
 
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