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

Here's a revealing data point: older Americans are scared more of outliving wealth than of death itself.

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.

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.

That means if you had $1 million in 10-year Treasuries, the difference in yield between 1999 and today 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.

So what's a retiree to do? You could cut your expenses to the bone, and take the risk that your Social Security checks don't shrink. Or you could find an alternative investment that provides a steady, higher-rate income stream to replace dwindling bond yields.

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.

Avient (AVNT) is currently shelling out a dividend of $0.28 per share, with a dividend yield of 3.03%. This compares to the Chemical - Diversified industry's yield of 1.45% and the S&P 500's yield of 1.34%. The company's annualized dividend growth in the past year was 4.85%. Check Avient dividend history here>>>

Fidelity National Information Services (FIS) is paying out a dividend of $0.44 per share at the moment, with a dividend yield of 3.93% compared to the Financial Transaction Services industry's yield of 0% and the S&P 500's yield. The annualized dividend growth of the company was 11.11% over the past year. Check Fidelity National Information Services dividend history here>>>

Currently paying a dividend of $0.32 per share, Alpine Income (PINE) has a dividend yield of 5.95%. This is compared to the REIT and Equity Trust - Other industry's yield of 3.99% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 3.64%. Check Alpine Income 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.

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

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

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