Stocks That Pay You Backhttp://www.fool.com/investing/dividends-income/2006/12/22/stocks-that-pay-you-back.aspx Todd Wenning
December 22, 2006
What will you use to generate income in retirement?
Many investors think low-risk fixed-income products like Treasury bonds and CDs will do the trick. But as current retirees have learned in the past few years, these products may not be enough. Since 2001, for instance, the yield on the 10-year Treasury hovered between 3% and 5% -- generating a paltry $300 to $500 per year for each $10,000 invested.
That's simply not enough to live on today, let alone 10 or 20 years down the road.
So what's an investor to do?
Get started now
The catch is that to maximize the utility of dividend-paying stocks, they should be purchased well before you actually need the income. That's because the longer you hold onto a dividend payer, the bigger your dividends tend to get.
For example, an investor who picked up $10,000 worth of Altria in January 1970 initially acquired 277 shares, a stake that would have started by paying out a mere $69 per quarter at the time.
That wasn't much then, but after 37 years of stock splits, our hypothetical investor now has 26,592 shares of Altria -- worth $2.26 million today. Perhaps more importantly, our investor is receiving $91,476 each year in dividends. (It should also be noted that these figures would be even larger if the investor reinvested dividends over the years.)
It's hard to believe, but this one stock alone could have funded your retirement.
Staring you in the face
** Based on trailing 12-month dividends per share
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