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How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks

Here's an eye-opening statistic: older Americans are more afraid of running out of money than of death itself.

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.

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

For many years, bonds or other fixed-income assets could produce the yield needed to provide solid income for retirement needs. However, these yields have dwindled over time: 10-year Treasury bond rates in the late 1990s were around 6.50%, but today, that rate is a thing of the past, with a slim likelihood of rates making a comeback in the foreseeable future.

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.

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.

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

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.

One approach to recognizing appropriate stocks is to look for companies with an average dividend yield of 3% and positive average annual dividend growth. Numerous stocks hike dividends over time, counterbalancing inflation risks.

Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.

Canadian Natural Resources (CNQ) is currently shelling out a dividend of $0.57 per share, with a dividend yield of 4.29%. This compares to the Oil and Gas - Exploration and Production - Canadian industry's yield of 0% and the S&P 500's yield of 1.74%. The company's annualized dividend growth in the past year was 52.26%. Check Canadian Natural Resources (CNQ) dividend history here>>>

Kimco Realty (KIM) is paying out a dividend of $0.22 per share at the moment, with a dividend yield of 4.35% compared to the REIT and Equity Trust - Retail industry's yield of 4.45% and the S&P 500's yield. The annualized dividend growth of the company was 17.65% over the past year. Check Kimco Realty (KIM) dividend history here>>>

Currently paying a dividend of $0.22 per share, Kite Realty Group (KRG) has a dividend yield of 4.45%. This is compared to the REIT and Equity Trust - Retail industry's yield of 4.45% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 17.65%. Check Kite Realty Group (KRG) dividend history here>>>

But aren't stocks generally more risky than bonds?

It is true that stocks, as an asset class, carry more risk than bonds, but high-quality dividend stocks not only have the ability to produce income growth over time but more importantly, can also reduce your overall portfolio volatility relative to the broader 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 interested in investing in dividends, but are thinking about mutual funds or ETFs rather than stocks, beware of fees. Mutual funds and specialized ETFs may carry high fees, which could lower the overall gains you earn from dividends, undercutting your dividend income strategy. Be sure to look for funds with low fees if you decide on this approach.

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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Canadian Natural Resources Limited (CNQ) : Free Stock Analysis Report
 
Kimco Realty Corporation (KIM) : Free Stock Analysis Report
 
Kite Realty Group Trust (KRG) : Free Stock Analysis Report
 
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