Boost Your Retirement Income with These Top-Ranked Dividend Stocks: A Smarter Approach to Secure Your Future
As Americans age, they often face a daunting reality: outliving their wealth. This fear is more prevalent than the fear of death itself, according to a recent study. This is particularly true for retirees who have relied on traditional methods of retirement planning, which may no longer be sufficient to cover their expenses. With decreasing investment balances and longer life expectancies, some retirees are forced to tap into their principal to make ends meet.
The traditional approach of investing in 10-year Treasury bonds, which once offered a yield of around 6.50%, is no longer viable due to significantly lower yields. For a $1 million investment in 10-year Treasuries, the rate drop means a difference in yield of over $1 million. Additionally, retirees are nervous about their future Social Security benefits, which are estimated to run out of funds by 2035 due to demographic factors.
What can retirees do? One option is to cut expenses to the bone and hope that Social Security checks don't shrink. However, a more proactive approach is to find an alternative investment that provides a steady, higher-rate income stream to replace dwindling bond yields.
Dividend Stocks as a Smart Investment Strategy: Dividend-paying stocks from low-risk, high-quality companies are a smart way to generate steady and reliable income streams. These stocks have the potential to combat inflation by boosting dividends over time. A rule of thumb for finding solid income-producing stocks is to seek those that average 3% dividend yield and positive yearly dividend growth.
Three Dividend-Paying Stocks to Consider:
- Cadence (CADE): Currently shelling out a dividend of $0.28 per share with a dividend yield of 3.67%. This compares favorably to the Banks - Southeast industry's yield of 2.26% and the S&P 500's yield of 1.58%. The company's annualized dividend growth in the past year was 10%.
- Canadian Imperial Bank (CM): Paying out a dividend of $0.71 per share with a dividend yield of 3.94%. This compares to the Banks - Foreign industry's yield of 3.33% and the S&P 500's yield. The annualized dividend growth of the company was 1.18% over the past year.
- Manulife Financial (MFC): Currently paying a dividend of $0.32 per share with a dividend yield of 4.09%. This compares to the Insurance - Life Insurance industry's yield of 1.61% and the S&P 500's current yield. The annualized dividend growth for the company in the past year was 2.18%.
Are Dividend Stocks Riskier than Bonds? While stocks, as a broad category, carry more risk than bonds, dividend-paying stocks from high-quality companies can generate income over time and mitigate the overall volatility of your portfolio compared to the stock market as a whole. Additionally, many dividend-paying companies (especially blue chip stocks) generally increase their dividends over time, which can help lessen the effects of inflation.
Investing in Dividend-Focused Mutual Funds or ETFs: Watch Out for Fees If you're considering investing in a dividend-focused ETF or mutual fund, be aware that some funds charge high fees, which may diminish your dividend gains or income and thwart the overall objective of this investment strategy
