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Ask a Fool: How Can I Find Worry-Free Dividend Stocks After Retirement?

By Matthew Frankel, CFP® - Dec 29, 2017 at 12:00PM

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While there’s no such thing as a risk-free stock, stable companies with long payout histories offer the next best thing.

Q: I'm 74 and getting back into stocks. I would like to know how to search for dividend-paying stocks to hold till the end.

First of all, you're making the right move by getting back into stocks. Although retirees should have less exposure to equities than say, a 35-year-old, stocks are an important component of a well-rounded portfolio for investors of any age.

This is especially true for dividend stocks, which can provide retirees with growing income streams, as well as capital appreciation to help keep up with inflation.

So how do you find the right kind of dividend stocks for retirees?

First, narrow your search to companies with dividend yields that are at least the market average – let's say 2% or higher. Anything lower and it's tough to call it an "income stock."

Next, look for companies with well-established track records of dividend increase and no dividend cuts. This doesn't guarantee that they will keep following that pattern of behavior, but it makes it more likely. The S&P High Yield Dividend Aristocrats index, which contains more than 100 dividend stocks that have increased their payouts for at least 20 consecutive years, is a good place to start your search.

AT&T (T -0.07%) is one of my favorite examples. The telecom giant yields 5.1% and has increased its annual payout for 32 consecutive years, thanks to its steady, utility-like income stream. Net-lease real estate investment trust National Retail Properties (NNN 1.01%), with its 4.4% yield and 28-year dividend-increase streak, is another good option.

Or, if you don't want to engage in the heavy lifting of choosing individual stocks, the Vanguard High Dividend Yield Index Fund ETF (VYM -0.44%) is a low-cost fund that invests in all the stocks in the index, offering you both dividends and diversification.

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Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
$20.95 (-0.07%) $0.01
National Retail Properties, Inc. Stock Quote
National Retail Properties, Inc.
$43.44 (1.01%) $0.43
Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF Stock Quote
Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF
$101.25 (-0.44%) $0.45

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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