How To Maximize Your Retirement Portfolio With These Top-Ranked Dividend Stocks - March 02, 2020

Here's a revealing data point: older Americans are scared more of outliving wealth than of death itself.

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.

Retirement investing approaches of the past don'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 - currently under 2% and probably not a viable return option to fund typical retirements.

That means if you had $1 million in 10-year Treasuries, the difference in yield between 1999 and today is more than $1 million.

In addition to the considerable drop in bond yields, today's retirees are nervous about their future Social Security benefits. Because of certain demographic factors, it's been estimated that the funds that pay the Social Security benefits 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

As we see it, dividend-paying stocks from generally low-risk, top notch companies are a brilliant way to create steady and solid income streams to supplant current low risk, low yielding Treasury and fixed-income alternatives.

For example, AT&T (NYSE:T) and Coca-Cola (NYSE:KO) are income stocks with attractive dividend yields of 3% or better. Look for stocks like this 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.

Arrow Financial (AROW) is currently shelling out a dividend of $0.26 per share, with a dividend yield of 3.28%. This compares to the Banks - Northeast industry's yield of 1.86% and the S&P 500's yield of 2.07%. In terms of dividend growth, the company's current annualized dividend of $1.04 is up 3% from last year.

Barclays (LON:BARC) (BCS) is paying out a dividend of 0.3 per share at the moment, with a dividend yield of 7.9% compared to the Banks - Foreign industry's yield of 3.69% and the S&P 500's yield. Taking a look at the company's dividend growth, its current annualized dividend of $0.61 is up 14% from last year.

Currently paying a dividend of 0.12 per share, Brookline Bancorp (BRKL) has a dividend yield of 3.32%. This is compared to the Financial - Savings and Loan industry's yield of 2.41% and the S&P 500's current yield. Looking at dividend growth, the company's current annualized dividend of $0.46 is up 9.52% from last year.

But aren't stocks generally more risky than bonds?

Yes, that's true. As a broad category, bonds carry less risk than stocks. However, the stocks we are talking about - dividend -paying stocks from high-quality companies - can generate income over time and also mitigate the overall volatility of your portfolio compared to the stock market as a whole.

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.

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

Seeking steady, consistent income through dividends can be a smart option for financial security in retirement, whether you invest in mutual funds, ETFs, or in dividend-paying stocks.

Generating income is just one aspect of planning for a comfortable retirement.

To learn more ways to maximize your assets - and avoid pitfalls that could jeopardize your financial security - download our free report:

Will You Retire a Multi-Millionaire? 7 Things You Can Do Now

This helpful guide offers our viewpoints about strategic retirement investment planning, based on decades of experience helping our clients prepare for financial security during their golden years. Get Your FREE Guide Now

Arrow Financial Corporation (AROW): Free Stock Analysis Report

Barclays PLC (BCS): Free Stock Analysis Report

Brookline Bancorp, Inc. (BRKL): Free Stock Analysis Report

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