In order to have peace of mind in retirement, people need to know that they will have enough cash coming in every month to pay the bills. Social Security may serve as the foundation of that retirement income structure, but your benefit checks will only replace about 40% of your pre-retirement income. Where are you going to get the other 60%?
In addition to drawing down on your savings accounts, one way to meet your need for a steady flow of income after you stop working full time is to invest in dividend stocks. By owning equities that pay healthy dividends, you can guarantee that there'll be additional cash flow every month or quarter to supplement your Social Security payments. Here are three of my favorites.
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1. From garbage to gold
Some companies go in and out of favor, but garbage will never go out of style. Waste Management (WM -1.22%) administers the largest trash collection and disposal business in the country, and is also the largest collector of recyclables. The company is relatively recession-proof since people generate trash no matter what's happening in the economy. According to the Environmental Protection Agency, the country's "generation of municipal solid waste (MSW) in 2017 was 267.8 million tons (U.S. short tons, unless specified) or 4.51 pounds per person per day." That's a lot of waste that needs managing.
The company's dividend payment, however, is anything but garbage. For the past 17 years, it has annually increased its dividend -- which means a steadily growing cash stream is always flowing out to Waste Management shareholders. As of Oct. 21, the dividend payout was $2.14 per share. That equates to a yield of only 1.9%, but that's because the stock price has been heading primarily in one direction -- up.
If you want trustworthy and steady income to supplement your Social Security checks, Waste Management is an excellent choice.
2. A mouthwatering dividend
If you're looking for nice, juicy dividends, AbbVie (ABBV -4.58%) is worth a gander. The company was spun off from pharmaceutical giant Abbott Laboratories in 2013, and now has an attractive portfolio of treatments, along with a 5.7% dividend yield that will be a welcome addition to any retiree's portfolio.
The company is facing challenges, as the patent for its top-selling drug, Humira, expired in 2016. However, in 2019, AbbVie bought Allergan, which makes eye-care products as well as Botox, and the revenues from this new acquisition will hopefully replace some of the sales of Humira that are being lost to generic competition. There are many more products in AbbVie's pipeline now, so retirees can sit back and enjoy that huge dividend while waiting for Allergan to be fully integrated into its new owner's operation.
3. A safe financial basket in which to put your eggs
My final choice is not a stock, but rather, a basket of stocks in the form of an exchange-traded fund. The Pro Shares S&P 500 Dividend Aristocrats ETF (NOBL -0.35%) holds all 66 of those elite S&P 500 companies that have increased their dividends annually for 25 consecutive years.
That portfolio includes such well-known names as Johnson & Johnson, Coca-Cola, Lowe's, and McDonald's. Since these businesses habitually raise their payouts, the fund does as well. The beauty of owning this group of stocks means that even if one company isn't doing well, it won't have a major effect on the ETF's returns as a whole. Investors looking for steady income will always find it in this financial vehicle.
You've earned your Social Security payments from all your hard work, but that benefit just won't be enough for you to have an enjoyable retirement. By holding dividend stocks, you can add steady streams of income to your financial picture. That's why each of these investment options can provide you with a little peace of mind along with a little piece of income.
