3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income

Cal-Maine Foods

-0.93%

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

Also, retirees who have constructed a nest egg have valid justifications to be concerned, since the traditional ways to plan for retirement may mean income can no longer cover expenses. Some retirees are now tapping their principal to make a decent living, pressed for time between decreasing investment balances and longer life expectancies.

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 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.

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.

Unfortunately, it looks like the two traditional sources of retirement income - bonds and Social Security - may not be able to adequately meet the needs of present and future retirees. But what if there was another option that could provide a steady, reliable source of income in retirement?

Invest in Dividend Stocks

Dividend-paying stocks from low-risk, high-quality companies are a smart way to generate steady and reliable attractive income streams to replace low risk, low yielding Treasury and bond options.

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.

American Assets Trust (AAT)

is currently shelling out a dividend of $0.34 per share, with a dividend yield of 4.78%. This compares to the REIT and Equity Trust - Retail industry's yield of 3.62% and the S&P 500's yield of 1.46%. The company's annualized dividend growth in the past year was 1.52%. Check American Assets Trust dividend history here>>>

Banco Latinoamericano (BLX)

is paying out a dividend of $0.5 per share at the moment, with a dividend yield of 5.81% compared to the Banks - Foreign industry's yield of 3.94% and the S&P 500's yield. The annualized dividend growth of the company was 100% over the past year. Check Banco Latinoamericano dividend history here>>>

Currently paying a dividend of $1.02 per share,

Cal-Maine Foods (CALM)

has a dividend yield of 4.48%. This is compared to the Agriculture - Products industry's yield of 0% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 1.99%. Check Cal-Maine Foods 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.

Combating the impact of inflation is one advantage of owning these dividend-paying stocks. Here's why: many of these stable, high-quality companies increase their dividends over time, which translates to rising dividend income that offsets the effects of inflation.

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

If you prefer investing in funds or ETFs compared to individual stocks, you can still pursue a dividend income strategy. However, it's important to know the fees charged by each fund or ETF, which can ultimately reduce your dividend income, working against your strategy. Do your homework and make sure you know the fees charged by any fund before you invest.

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.

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3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income

Zacks

Cal-Maine Foods

-0.93%

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

And unfortunately, even retirees who have built a nest egg have good reason to be concerned - with the traditional approaches to retirement planning, income may no longer cover expenses. That means retirees are dipping into principal to make ends meet, setting up a race against time between dwindling investment balances and longer lifespans.

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

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.

Invest in Dividend Stocks

Dividend-paying stocks from low-risk, high-quality companies are a smart way to generate steady and reliable attractive income streams to replace low risk, low yielding Treasury and bond options.

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.

American Assets Trust (AAT)

is currently shelling out a dividend of $0.34 per share, with a dividend yield of 4.9%. This compares to the REIT and Equity Trust - Retail industry's yield of 3.66% and the S&P 500's yield of 1.56%. The company's annualized dividend growth in the past year was 1.52%. Check American Assets Trust dividend history here>>>

Banco Latinoamericano (BLX)

is paying out a dividend of $0.5 per share at the moment, with a dividend yield of 6.12% compared to the Banks - Foreign industry's yield of 3.8% and the S&P 500's yield. The annualized dividend growth of the company was 100% over the past year. Check Banco Latinoamericano dividend history here>>>

Currently paying a dividend of $1.02 per share,

Cal-Maine Foods (CALM)

has a dividend yield of 4.59%. This is compared to the Agriculture - Products industry's yield of 0% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 1.99%. Check Cal-Maine Foods dividend history here>>>

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

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

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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New Strong Buy Stocks for November 5th

Zacks

ADT Inc.

-1.45%

Here are five stocks added to the Zacks Rank #1 (Strong Buy) List today:

American Assets Trust, Inc. AAT: This self-administered real estate investment trust has seen the Zacks Consensus Estimate for its current year earnings increasing 10% over the last 60 days.

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American Assets Trust, Inc. price-consensus-chart | American Assets Trust, Inc. Quote

Quad/Graphics, Inc. QUAD: This marketing solutions company has seen the Zacks Consensus Estimate for its current year earnings increasing 10.5% over the last 60 days.

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Corcept Therapeutics Incorporated CORT: This drugmaker for severe endocrinologic, oncologic, metabolic, and neurologic disorders has seen the Zacks Consensus Estimate for its current year earnings increasing 13.6% over the last 60 days.

Corcept Therapeutics Incorporated Price and Consensus

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Comerica Incorporated CMA: This company that provides financial products and services has seen the Zacks Consensus Estimate for its current year earnings increasing 6.3% over the last 60 days.

Comerica Incorporated Price and Consensus

Comerica Incorporated price-consensus-chart | Comerica Incorporated Quote

ADT Inc. ADT: This smart home solutions providing company has seen the Zacks Consensus Estimate for its current year earnings increasing 12.1% over the last 60 days.

ADT Inc. Price and Consensus

ADT Inc. price-consensus-chart | ADT Inc. Quote

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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