Income for Retirement: Understanding High-Yield Dividend Stocks

Retirement can be scary because you lose the safety and security of receiving a monthly paycheck from your company. 

What if you could still get monthly paychecks from Fortune 500 companies during retirement?

We need a high level of income to satisfy our financial needs during retirement so we can invest in companies that pay huge dividends.

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Welcome back to the Income for Retirement Series (Preferred Shares, Closed-End Funds, Mortgage REITs, Dividend ETFs, BDCs), where we scout the stock market for the safest high-yielding securities. 

What are high-yield blue-chip dividend stocks? When discussing Dividend Growth Investing (DGI), we focus on companies that significantly increase their dividend payments yearly.

For example, Microsoft’s (MFST) dividend growth rate was close to 11% over the last ten years. However, their dividend yield was between 0.5% to 1.5%,

The goal of investing with MFST would be to collect the dividend increases over a long time. Eventually, you would receive a fantastic yield on cost from investing early and often.

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But going into retirement at age 60 does not give you 30 years to wait for MFST to increase their dividends—you need dividends now!

Dividend investing in your 60s and 70s should look different than in your 20s and 30s. We can find blue-chip companies that yield 5% to 8% and give us the needed income.

Finding steady, high-yield companies. Some of the highest-paying stocks are banking, utility, tobacco, oil, and telecommunications companies. 

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You should look for a history of dividend payments and maybe even dividend growth. I like to read Seeking Alpha every night to find income products.

Let’s look at some of my favorite high-yielding blue-chip dividend stocks. Of course, your list may vary based on your needs.

1. Telecommunications: AT&T (T) Yield 7.39%, Verizon (VZ) Yield 8.31%
2. Tobacco: Altria (MO) Yield 9.32%, Philip Morris (PM) Yield 5.62%, British Tobacco (BTI) Yield 9.10%, Vector Group (VGR) Yield 7.52%
3. Banking: Bank of Nova Scotia (BNS) Yield 6.85%
4. Oil: Antero Midstream (AM) Yield 7.51%

Investing in high-yield dividend companies. Once you have a few companies in mind, it’s time to plunk down your money.

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These great companies appear in most applications like Cash App, M1 Finance, and STASH. From there, you can use fractional investing to dollar-cost averaging into your positions.

I recommend keeping a spreadsheet of your dividend stocks because they pay in different months. You want to have balanced payments across the year.

From the list above, here is how the monthly payments would look:

1. January, April, July, October: MO, PM, BNS
2. February, May, August, November: T, VZ, BTI, AM
3. March, June, September, December: VGR 

Once you start receiving dividends, you’ll want to reinvest at least 25% to ensure your income stays ahead of inflation.

Adding some growth to your dividend portfolio. Critics of high-yield investing often cite that these companies don’t grow much, and they are right.

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These are mature companies that generate tons of free cash flow every year. They dedicate most of their cash to capital expenditures, share buybacks, and dividends.

I like to add some index funds to my high-yield investment portfolio. Index funds ensure my portfolio still grows ahead of inflation.

I want my portfolio to appreciate (grow) faster than inflation, along with my dividend payments. Adding index funds will ensure I capture the market returns while receiving massive dividend payments.

My favorite index fund is the Vanguard Total Stock Market Index (VTI). I use VTI in every income-investing portfolio to balance my low-growth, high-income dividend stocks.

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I add low-paying, high-growth stocks like Microsoft (MFST) and Apple (APPL) to round out my portfolio. 

Living with high-yield dividends in retirement. There is no better feeling than receiving dividends in the morning. 

This morning, I woke to $77 from Ares Capital (ARES), a closed-end fund. I also had $11 for Simon Property Group (SPG), a Real Estate Investment Trust. Finally, I had $4 from Pepsi (PEP), an outstanding stock from dividend growth investing.

That is $92 I can use for whatever I want. During retirement, you want to have total control of your resources.

What is Passive Income?

You can deploy your dividends to go on vacations, travel the world, eat at restaurants, and have a date night. 

The world is your oyster, and these companies take great pride in ensuring they pay timely dividends.

I would build a portfolio of at least 20 high-yield companies over time. The real magic is balancing your high-yield companies with other income-investing products.

Most companies pay every quarter, so you can add monthly-paying closed-end funds to give you that solid base of monthly income.

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You can add some preferred shares and baby bonds to get a yield over 10%. A monthly paying mortgage REIT, like AGNC, can yield 12-15%.

You can invest in business development companies like Ares Capital (ARES) and Capital Southwest (CSWC), just like your high-yield dividend stocks.

Conclusion. I have been dividend investing for four years, and nothing gives me greater pleasure. I need money to buy more stocks.

Dividend investing gives you the best feedback loop you can imagine. The more you feed your stocks, the more income they produce.

Living Overseas Passively 103: Retirement Income

I can’t imagine what my dividend portfolio will look like in ten years. I am passing down all this information to my kids so they can start investing early.

High-yield blue-chip dividend stocks like AT&T (T) and Altria (MO) can give you the income you need today. 

You’ve come to the right place if you love getting paychecks from solid companies. How will dividends change your life? I know they changed mine. Good Luck!

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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.  I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing