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.
Retirement investing approaches of the past don't work today.
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.
And lower bond yields aren't the only potential problem seniors are facing. Today's retirees aren't feeling as secure as they once did about Social Security, either. Benefit checks will still be coming for the foreseeable future, but based on current estimates, Social Security funds will run out of money in 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.
CVB Financial (CVBF) is currently shelling out a dividend of $0.2 per share, with a dividend yield of 3.01%. This compares to the Banks - West industry's yield of 2.54% and the S&P 500's yield of 1.73%. The company's annualized dividend growth in the past year was 5.56%. Check CVB Financial (CVBF) dividend history here>>>
Horizon Bancorp (HBNC) is paying out a dividend of $0.16 per share at the moment, with a dividend yield of 3.35% compared to the Banks - Northeast industry's yield of 2.27% and the S&P 500's yield. The annualized dividend growth of the company was 23.08% over the past year. Check Horizon Bancorp (HBNC) dividend history here>>>
Currently paying a dividend of $0.54 per share, Kilroy Realty (KRC) has a dividend yield of 4.94%. This is compared to the REIT and Equity Trust - Other industry's yield of 4.36% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 3.85%. Check Kilroy Realty (KRC) 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
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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CVB Financial Corporation (CVBF) : Free Stock Analysis Report
Kilroy Realty Corporation (KRC) : Free Stock Analysis Report
Horizon Bancorp IN (HBNC) : Free Stock Analysis Report
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