Will Dividend Aristocrats Save Your Retirement?

Investors have come to rely on dividend stocks to get the income they need, and among the elite in dividend investing are the so-called Dividend Aristocrats, which have raised their annual payouts for 25 years in a row or longer. But are these dividend stocks a smart idea for those saving for or in retirement?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at a recent Bankrate survey that found that over the long run, the Dividend Aristocrats have beaten the S&P 500 (SNPINDEX: ^GSPC  ) and other stock funds in terms of total return. Dan notes that dividend stocks have had better long-term performance, with Coca-Cola (NYSE: KO  ) and Altria (NYSE: MO  ) among the many dividend stocks that have produced outstanding total returns for decades. But Dan reminds investors that earnings multiples on dividend stocks are higher than usual, citing average P/E ratios on Vanguard Dividend Appreciation ETF (NYSEMKT: VIG  ) that match the broader market as an unusual sign. Moreover, Dan says that for some dividend stocks, rising interest rates could pressure shares as well. Dan concludes that dividend stocks are a smart way to invest, but you shouldn't rely solely on them for your financial future.

Get the right dividend stocks
It's true that one of the dirty secrets that few finance professionals will openly admit is that dividend stocks as a group handily outperform their non-dividend-paying brethren. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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Related Tickers

8/28/2015 4:55 PM
^GSPC $1988.87 Up +1.21 +0.06%
S&P 500 INDEX CAPS Rating: No stars
KO $39.45 Up +0.18 +0.46%
Coca-Cola CAPS Rating: ****
MO $54.17 Up +0.46 +0.86%
Altria Group, Inc. CAPS Rating: ****
VIG $76.14 Down -0.08 -0.10%
Vanguard Dividend… CAPS Rating: ****