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

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

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.

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.

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.

How can you avoid dipping into your principal when the investments you counted on in retirement aren't producing income? You can only cut your expenses so far, and the only other option is to find a different investment vehicle to generate income.

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.

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 $0.31 per share, with a dividend yield of 4.26%. This compares to the REIT and Equity Trust - Retail industry's yield of 4.13% and the S&P 500's yield of 1.49%. The company's annualized dividend growth in the past year was 5.5%. Check Brixmor Property dividend history here>>>

Eni SpA (E) is paying out a dividend of $0.42 per share at the moment, with a dividend yield of 3.12% compared to the Oil and Gas - Integrated - International industry's yield of 0% and the S&P 500's yield. The annualized dividend growth of the company was 12.07% over the past year. Check Eni SpA dividend history here>>>

Currently paying a dividend of $0.64 per share, Independent Bank Corp. (INDB) has a dividend yield of 3.14%. This is compared to the Banks - Northeast industry's yield of 2.25% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 3.51%. Check Independent Bank Corp. dividend history here>>>

But aren't stocks generally more risky than bonds?

Overall, that is true. But stocks are a broad class, and you can reduce the risks significantly by selecting high-quality dividend stocks that can generate regular, predictable income and can also decrease the volatility of your portfolio compared to the overall 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

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

This article originally published on Zacks Investment Research (zacks.com).

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