How to Maximize Your Retirement Portfolio with These Top-Notch Dividend Stocks – March 15, 2023

Believe it or not, seniors are more afraid of running out of money than they are of dying.

And older Americans have legitimate reasons for that concern, even if they’ve been dutifully saving for their golden years. That’s because the traditional way people manage retirement may no longer provide enough income to cover expenses — and as people tend to live longer, the core retirement savings are exhausted far too early in retirement .

In today’s economic environment, traditional income investments don’t work.

Years ago, investors in or nearing retirement could put money into fixed income investments and rely on attractive yields to generate consistent, solid cash flows to fund a comfortable retirement. 10-year Treasury yields were hovering around 6.50% in the late 1990s, but sadly, gone are the days when Treasury yields could be solely relied on to fund retirement incomes.

The impact of this drop in interest rates is significant: over 20 years, the change in yield on a $1 million investment in 10-year Treasuries is over $1 million.

Along with the significant drop in bond yields, today’s retirees are nervous about their future Social Security benefits. Due to certain demographic factors, it is estimated that the funds that pay Social Security benefits will run out of money by 2035.

So what can retirees do? You could drastically cut your expenses and get on your feet hoping your Social Security benefits won’t diminish. On the other hand, you might choose an alternative investment that offers a steady, higher-yielding income stream to replace falling bond yields.

Invest in dividend stocks

As a substitute for low-yielding government bonds (and other debt options), we believe dividend-paying stocks of quality companies offer the low risk and stable, predictable income that investors seek in retirement.

Look for stocks that have paid steadily increasing dividends for years (or decades) and haven’t cut their dividends even during recessions.

Beyond these household names, you can find excellent dividend stocks by following a few guidelines. Look for companies that pay a dividend yield of around 3% and have positive annual dividend growth. The growth rate is key to combating the effects of inflation.

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

Bank United, Inc. (BKU – free report) currently pays a dividend of $0.27 per share, with a dividend yield of 4.17%. This compares to the Banks Industry – Major Regional return of 4.17% and the S&P 500 return of 1.77%. The company’s annualized dividend growth was 8.7% over the past year. Check BankUnited, Inc. (BKU – Free Report) Dividend history here>>>

New Jersey Resources (NJR – free report) currently pays a dividend of $0.39 per share, with a dividend yield of 3.02% compared to the utility gas distribution industry yield of 3.02% and the S&P 500 yield. The company’s annualized dividend growth was in last year 7.59%. Check New Jersey Resources (NJR – Free Report) Dividend history here>>>

Currently paying a dividend of $1.25 per share, Regulatory (PRU – free report) has a dividend yield of 5.98%. This is compared to the insurance and multi-line industry’s return of 2.14% and the current return of the S&P 500. The company’s annualized dividend growth was 4.35% over the past year. check prudential (PRU – Free Report) Dividend history here>>>

But aren’t stocks generally riskier than bonds?

Yes, that’s right. As a broad category, bonds carry less risk than stocks. However, the stocks we’re talking about – dividend-paying stocks of quality companies – can generate income over time and also reduce the overall volatility of your portfolio relative to the stock market as a whole.

One benefit of adding dividend stocks to your retirement portfolio: They can help mitigate the effects of inflation, since many dividend-paying companies (especially blue-chip stocks) generally increase their dividends over time.

Considering 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,” you should do your homework. It’s important to realize that some mutual funds and specialty ETFs charge high fees that can eat away at your dividend gains or income, and defeat the overall objective of this investment strategy. If you’re looking to invest in funds, do your research to find the highest quality dividend funds with the lowest fees.

bottom line

Pursuing a dividend investing strategy can help protect your retirement portfolio. Whether you decide to invest in stocks or through low-interest mutual funds or ETFs, this approach can potentially help you achieve a safer, more comfortable retirement.

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