How to Maximize Your Retirement Portfolio with These Top-Ranked Dividend Stocks

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.

Retirement investing approaches of the past don't work today.

In the past, investors going into retirement could invest in bonds and count on attractive yields to produce steady, reliable income streams to fund a predictable retirement. 10-year Treasury bond rates in the late 1990s hovered around 6.50%, whereas the current rate is much lower.

The effect of this drop in rates is substantial: over 20 years, the change in yield for a $1 million investment in 10-year Treasuries is over $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

We feel that these dividend-paying equities - as long as they are from high-quality, low-risk issuers - can give retirement investors a smart option to replace low-yielding Treasury bonds (or other bonds).

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.

Brixmor Property (BRX) is currently shelling out a dividend of $0.27 per share, with a dividend yield of 4.93%. This compares to the REIT and Equity Trust - Retail industry's yield of 4.5% and the S&P 500's yield of 1.54%. The company's annualized dividend growth in the past year was 4.81%. Check Brixmor Property (BRX) dividend history here>>>

COPT Defense (CDP) is paying out a dividend of $0.3 per share at the moment, with a dividend yield of 5.07% compared to the REIT and Equity Trust - Other industry's yield of 4.47% and the S&P 500's yield. The annualized dividend growth of the company was 3.51% over the past year. Check COPT Defense (CDP) dividend history here>>>

Currently paying a dividend of $0.25 per share, Kite Realty Group (KRG) has a dividend yield of 4.8%. This is compared to the REIT and Equity Trust - Retail industry's yield of 4.5% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 4.17%. Check Kite Realty Group (KRG) dividend history here>>>

But aren't stocks generally more risky than bonds?

The fact is that stocks, as an asset class, carry more risk than bonds. To counterbalance this, invest in superior quality dividend stocks that not only can grow over time but more significantly, can also decrease your overall portfolio volatility with respect 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'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

Whether you select high-quality, low-fee funds or stocks, seeking the steady income of dividend-paying equities can potentially offer you a path to a better and more stress-free retirement.

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Brixmor Property Group Inc. (BRX) : Free Stock Analysis Report

Kite Realty Group Trust (KRG) : Free Stock Analysis Report

COPT Defense Properties (CDP) : Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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