How To Retire Cash-Rich With Dividends

Many older Americans face an ugly reckoning right now: To retire on time, they’ll need to increase what they save by as much as 80 percent. But savvy investors are figuring out how to close the gap by turning their savings into extra income. In its May issue, SmartMoney magazine offers a guide to keeping the cash flowing.

With short-term price gains expected to be low, of course, the offense played by stocks may be less Drew Brees football fireworks and more three yards and a cloud of dust. That’s why advisers are reemphasizing dividend-paying stocks, which pay a portion of their revenues directly to shareholders. Granted, the recession wasn’t kind to dividend yields, as beleaguered companies got stingy and cut payments. The average yield of stocks in the S&P 500 is currently 2.0 percent, down from the historical average of 3.8 percent. In the days of go-go stocks, “we would have laughed at that,” says Joan Crain, a senior director and wealth strategist at Bank of New York Mellon. But the trend is turning, as companies see their profits improve. Standard & Poor’s senior index analyst Howard Silverblatt says that since November, there have been around 100 dividend increases and only two decreases; overall, he expects that dividend payments will rise this year after having fallen for the past two.

Source: SmartMoney


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