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

Here's an eye-opening statistic: older Americans are more afraid of running out of money 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.

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

While this yield reduction may not seem drastic, it adds up: for a $1 million investment in 10-year Treasuries, the rate drop means a difference in yield of 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.

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.

Independence Realty Trust (IRT) is currently shelling out a dividend of $0.14 per share, with a dividend yield of 3.11%. This compares to the REIT and Equity Trust - Residential industry's yield of 3.14% and the S&P 500's yield of 1.77%. The company's annualized dividend growth in the past year was 16.67%. Check Independence Realty Trust (IRT) dividend history here>>>

Paramount Group (PGRE) is paying out a dividend of $0.08 per share at the moment, with a dividend yield of 4.65% compared to the REIT and Equity Trust - Other industry's yield of 4.23% and the S&P 500's yield. The annualized dividend growth of the company was 10.71% over the past year. Check Paramount Group (PGRE) dividend history here>>>

Currently paying a dividend of $0.13 per share, RPT Realty (RPT) has a dividend yield of 6.01%. This is compared to the REIT and Equity Trust - Residential industry's yield of 3.14% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 73.33%. Check RPT Realty (RPT) 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.

A silver lining to owning dividend stocks for your retirement portfolio is that many companies, especially blue chip stocks, increase their dividends over time, helping offset the effects of inflation on your potential retirement income.

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

If you're interested in investing in dividends, but are thinking about mutual funds or ETFs rather than stocks, beware of fees. Mutual funds and specialized ETFs may carry high fees, which could lower the overall gains you earn from dividends, undercutting your dividend income strategy. Be sure to look for funds with low fees if you decide on this approach.

Bottom Line

Regardless of whether you select high-quality, low-fee funds or stocks, looking for a steady stream of income from dividend-paying equities can potentially lead you to a solid and more peaceful retirement.


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Independence Realty Trust, Inc. (IRT): Free Stock Analysis Report
 
RPT Realty (RPT): Free Stock Analysis Report
 
Paramount Group, Inc. (PGRE): Free Stock Analysis Report
 
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