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

Strange but true: seniors fear death less than running out of money in retirement.

And older Americans have legitimate reasons for this worry, even if they have dutifully saved for their golden years. That's because the traditional ways people manage retirement may no longer provide enough income to meet expenses - and with people generally living longer, the principal retirement savings is exhausted far too early in the retirement period.

Your parents' retirement investing plan won't cut it 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.

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

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.

A rule of thumb for finding solid income-producing stocks is to seek those that average 3% dividend yield, and positive yearly dividend growth. These stocks can help combat inflation by boosting dividends over time.

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

Apple Hospitality REIT (APLE) is currently shelling out a dividend of $0.07 per share, with a dividend yield of 6.05%. This compares to the REIT and Equity Trust - Other industry's yield of 4.42% and the S&P 500's yield of 1.85%. The company's annualized dividend growth in the past year was 1400%. Check Apple Hospitality REIT (APLE) dividend history here>>>

CTO Realty (CTO) is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 8.02% compared to the REIT and Equity Trust - Other industry's yield of 4.42% and the S&P 500's yield. The annualized dividend growth of the company was 12% over the past year. Check CTO Realty (CTO) dividend history here>>>

Currently paying a dividend of $0.15 per share, Essa Bancorp (ESSA) has a dividend yield of 3%. This is compared to the Financial - Savings and Loan industry's yield of 2.37% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 25%. Check Essa Bancorp (ESSA) 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 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

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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Apple Hospitality REIT, Inc. (APLE): Free Stock Analysis Report
 
CTO Realty Growth, Inc. (CTO): Free Stock Analysis Report
 
ESSA Bancorp, Inc. (ESSA): Free Stock Analysis Report
 
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