Improve Your Retirement Income with These 3 Top-Ranked Dividend Stocks

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Believe it or not, seniors fear running out of cash more than they fear dying.

And retirees have good reason to be worried about making their assets last. People are living longer, so that money has to cover a longer period. Making matters worse, income generated using tried-and-true retirement planning approaches may not cover expenses these days. That means seniors must dip into principal to meet living expenses.

The tried-and-true retirement investing approach of yesterday doesn’t work 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.

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

As a replacement for low yielding Treasury bonds (and other bond options), we believe dividend-paying stocks from high quality companies offer low risk and stable, predictable income investors in retirement seek.

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.

Canon (CAJ) is currently shelling out a dividend of $0.37 per share, with a dividend yield of 3.08%. This compares to the Office Automation and Equipment industry’s yield of 3.08% and the S&P 500’s yield of 1.69%. The company’s annualized dividend growth in the past year was 13.53%. Check Canon (CAJ) dividend history here>>>

The First of Long Island (FLIC) is paying out a dividend of $0.2 per share at the moment, with a dividend yield of 4.35% compared to the Banks – Northeast industry’s yield of 2.36% and the S&P 500’s yield. The annualized dividend growth of the company was 5.26% over the past year. Check The First of Long Island (FLIC) dividend history here>>>

Currently paying a dividend of $0.61 per share, Global Partners LP (GLP) has a dividend yield of 8.36%. This is compared to the Oil and Gas – Refining and Marketing – Master Limited Partnerships industry’s yield of 7.11% and the S&P 500’s current yield. Annualized dividend growth for the company in the past year was 3.48%. Check Global Partners LP (GLP) 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.

An advantage of owning dividend stocks for your retirement nest egg is that numerous companies, particularly blue chip stocks, raise their dividends over time, helping alleviate the impact of inflation on your potential retirement income.

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

You may be thinking, “I like this dividend strategy, but instead of investing in individual stocks, I’m going to find a dividend-focused mutual fund or ETF.” This approach can make sense, but be aware that some mutual funds and specialized ETFs carry high fees, which may reduce your dividend gains or income, and defeat the goal of this dividend investment approach. If you do wish to invest in a fund, do your research to find the best-quality dividend funds with the lowest fees.

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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Canon, Inc. (CAJ) : Free Stock Analysis Report
 
Global Partners LP (GLP) : Free Stock Analysis Report
 
The First of Long Island Corporation (FLIC) : Free Stock Analysis Report
 
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