Decent dividend-paying stocks have more attractive yields, with yields on benchmark 10-year Treasuries hovering around 2.13%. Moreover, dividends have stayed ahead of inflation. Over the past 50-years, the S&P 500’s dividends have increased an average 5.7% per year, compared to the average 4.1% inflation rate.
The dividend stock plays may also enjoy dividend growth, along with capital appreciation, which could also help an investor maintain his or her nest egg longer. Consequently, with a larger portion of retirement money invested in dividend stocks, an investor would not be forced to withdraw, or sell off assets, from his or her portfolio as quickly to meet annual income needs, assuming if total yields fall short of the target 4% withdrawal rate. [ETF Options to Generate Income for Retirement]
Investors could utilize dividend-paying stock ETFs to help generate the income they are looking for. For instance, the iShares Core High Dividend ETF (NYSEArca: HDV), which tracks high-quality U.S. companies that have have been screened for financial health and relatively high dividends, has a 12-mont yield of 3.37%. The Vanguard High Dividend Yield ETF (NYSEArca: VYM) targets the largest and highest dividend-paying stocks and comes with a 2.84% yield. Additionally, the WisdomTree Equity Income Fund (NYSEArca: DHS), which weights stocks by total expected dividends paid in the coming year, has a 2.99% 12-month yield.
For more information on investing for retirement, visit our retirement category.
Max Chen contributed to this article.