Dividend stocks can play an incredible role in helping you retire comfortably, but not necessarily the way you think. On the surface, they look tempting. In today's low-interest-rate environment, it takes a 10-year U.S. Treasury bond to even approach the yield you can get by owning a typical S&P 500 stock. If you make investments that focus on dividends, you can collect even more cash from your stocks than you would by investing in that market-tracking index.
On top of that, dividends have the potential to increase over time -- and if you choose wisely, that income will be accompanied by capital appreciation. Add yields comparable to, or even higher than, those of bonds, and the case for owning dividend-paying companies starts to look compelling. These properties look particularly tempting for retirees, who tend to value steady income and avoid the risk of being forced to sell stocks in a down market to generate cash. If you can get enough income from dividends to cover your costs and enough income growth from dividend increases to beat inflation, then it looks like you can get what you need in a single package.
Source: Motley Fool
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