Why Dividend-Paying Stocks Are So Popular Now

Not only are the economy and financial markets sending mixed signals, now the Fed is too.

Up until recently, the Federal Open Market Committee of the Federal Reserve Board had been unanimous in its efforts to either hold steady or slowly increase interest rates based on labor market conditions and inflation factors. However, at the April meeting, at least one member expressed dissention about the board’s lack of more aggressive action.1

Uncertainty among the FOMC also makes it difficult for investors to see a clear future. As such, many have “fled to quality.” With continued low bond yields, high-quality stocks that pay growth dividends have become an attractive alternative to fixed income products.2 They tend to have less earnings volatility and generally more dividend income contributing to their returns than low-quality stocks.

A large allocation of equities, regardless of whether they’re dividend-paying, may not be the right move for all investors. We’re happy to take a look at your portfolio and entire financial picture to see if this asset class would be appropriate for your situation.

Dividend stocks generally pay out on a quarterly basis a portion of the company’s earnings for each share to shareholders. For example, if a company pays an annualized dividend of 20 cents per share, the company will send each shareholder a check for one-fourth of 20 cents (5 cents) for each share he or she owns at the end of each quarter. However, it is important for investors to understand that dividends are paid at the discretion of the board of directors and are therefore not guaranteed.

Many investors have gotten in the habit of reinvesting those dividends throughout their working careers, which has afforded them the opportunity to buy more shares. Once retired, they can take those dividend distributions instead of reinvesting them, thereby generating a stream of income from dividend-paying stocks. Again, this assumes that the company’s board of directors continues to declare and pay dividends on a regular basis.

Unlike the interest from bonds, stock dividends also tend to grow over time. In fact, stock dividend growth has historically outpaced inflation.3 If you count the value of dividends as part of the stock market’s overall total return, the S&P 500 has already surpassed its highest return on record.4

If you’re considering making any changes to your portfolio, it’s important to work with a financial advisor to review your options within the context of personal goals and your investment timeline. Even the securities you select need to be aligned with what’s already in your portfolio. Remember, investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Depending on your particular investment goals and risk tolerance, it may be suitable to consider a mutual fund or exchange-traded fund that bundles dividend stocks in one package for diversification and risk management purposes. Please feel free to contact us to discuss your particular situation.

 

Content prepared by Kara Stefan Communications.

Interested in reading more? Here are some articles that may be of interest to you:

[CLICK HERE to read the article, “How to pick dividend stocks,” from Fidelity, March 24, 2016.]

[CLICK HERE to read the article, “Warren Buffett’s Top 10 Dividend Stocks,” from TheStreet.com, April 22, 2016.]

1Patti Domm. CNBC. April 27, 2016. “Divided Fed aims for clarity but could create confusion.” http://www.cnbc.com/2016/04/26/fed-will-do-a-cautious-dance-to-avoid-volatility.html. Accessed May 17, 2016.

2Dani Burger. Bloomberg. April 23, 2016. “Aging Baby Boomers Push Spam, Diaper Stocks to Record Valuations.” http://www.bloomberg.com/news/articles/2016-04-24/aging-baby-boomers-push-spam-diaper-stocks-to-record-valuations. Accessed May 17, 2016.

3Aaron Levitt. Investopedia. “How To Live Off Your Dividends.” http://www.investopedia.com/financial-edge/0812/how-to-live-off-your-dividends.aspx. Accessed May 17, 2016.

4Jason Zweig. The Wall Street Journal. April 21, 2016. “S&P 500 Already Hit a Record – If You Count Dividends.” http://blogs.wsj.com/moneybeat/2016/04/21/sp-500-already-at-a-record-if-you-count-dividends/. Accessed May 17, 2016.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Home Sweet Home

Like other aspects of the economy, the real estate market has been slow to recover to “normal” levels. But we believe there are some positives that come with the lull in housing sales. In some pockets of the country, prices have escalated substantially due to low inventory, high demand and relatively low interest rates.

According to the National Association of Realtors, existing home sales in the Midwest and Northeast bolstered the market in March. Buyers are also expected to be out in force in most regions of the country during this spring sales season.

The mid-priced market is much stronger than properties that are very low or very high priced. This is because fewer mid-level homes are on the market, and lenders have stringent qualifications, leaving many low-end potential homeowners on the sidelines.

[CLICK HERE to read the article, “Existing-Home Sales Spring Ahead in March” from National Association of Realtors, April 20, 2016.]

[CLICK HERE to read the article, “Home sellers see strongest appreciation since the recession” from MarketWatch, April 21, 2016.]

If you’re in the market for buying or selling, consider talking with a qualified professional about how these changes may impact your financial strategy. Remember that profits may be able to be repositioned to strengthen your retirement savings, and that overextending for a real estate purchase could potentially impact your financial plans for the future.

It’s always good to review your retirement strategy within the context of your complete financial picture — particularly before you make any big decisions. Let us know if we can help you with your long-term financial goals.

[CLICK HERE to read the article, “Use the 20% Rule to Guide Real Estate Decisions” from NerdWallet.com, April 21, 2016.]

[CLICK HERE to read the article, “7 Home Buying and Selling Tips from the Property Brothers” from HGTV, 2016.]

It’s interesting that, despite the drop in home prices over the last decade, Americans still like their real estate. In a recent poll, 35 percent named real estate the “best long-term investment,” over stocks (22 percent) and gold (17 percent). Remember, investing involves risk, including the potential loss of principal, and no investment strategy can guarantee a profit or protect against loss in periods of declining values.

Millennials, on the other hand, favored savings accounts over real estate as their top choice. It just goes to show you that young adults have taken their first life lessons to heart, and that long-term experience can provide a wider perspective.

[CLICK HERE to read the article, “Gallup: 35 Percent of Americans Pick Real Estate as ‘Best Long-Term Investment’” from NewsMax.com, April 20, 2016.]

[CLICK HERE to read the article, “Investors should look beyond REITs to gain real estate exposure: Jeffrey Kolitch” from Investment News, April 19, 2016.]

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives.
This material has been prepared for our firm and contains general information to help you understand basic financial planning strategies that may help you work towards your financial goals. Please understand that I cannot make any promises or guarantees that you will accomplish such goals.  All investments are subject to risk including the complete loss of principal.

Throughout, we may generally discuss different financial vehicles; however, nothing contained herein should be construed as a recommendation to buy or sell any financial vehicle, nor should it be used to make decisions about your investments.

The information contained in this material has been obtained from third party sources believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.
If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

More Retirees Heading for Hubs

When retirement is on the horizon, many people put their current hometown in the rearview mirror. As the retiree population continues its upward trajectory, we expect popular retirement destinations to grow right along with it.

A recent study by McKinsey & Company identified 13 U.S. “retirement hubs” — cities that are most likely to experience rapid growth by retirees. In the next 14 years, the number of retirees is expected to grow by more than a third, from 164 million to 222 million.

Although modest Midwest towns are drawing more interest, the biggest draw for retirees is still the warm weather and sandy beaches of Florida.

[CLICK HERE to read the article, “Urban World: The Global Consumers to Watch” from McKinsey & Company, April 2016.]

[Copy and paste this link into your browser http://www.forbes.com/best-places-to-retire/list/ to read the article, “Best Places to Retire” from Forbes, 2016.]

[CLICK HERE to read the article, “The World’s Best Places to Retire In 2016” from International Living, Jan. 1, 2016.]

When you need guidance to reach your desired destination, both location-wise and financially, we’re here to help. There are a variety of ways to manage retirement assets, from annuities and 401(k) plans to IRAs, pensions and investments. Please remember that investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. If you’re looking to relocate in retirement, we can help evaluate what your expenses will look like and help create a personalized retirement income plan using a variety of insurance and investment products.

[CLICK HERE to read the article, “Should Annuities Be Part Of Your Retirement Portfolio?” from Fortune, Feb. 3, 2016.]

[CLICK HERE to read the article, “High-Yield Corporate Bonds: Compelling Relative Value Despite Volatility” from Guggenheim Partners, March 17, 2016.

[CLICK HERE to read the article, “How to get guaranteed retirement income for life” from CNN Money, Jan. 20, 2016.]

On the flip side, staying put is another popular option for retirees, especially if all their friends and family still live nearby. Much like the relaxing “staycations” that became commonplace during the recession, there’s no reason why you can’t make a retirement hub in your own hometown.

While your place of retirement may not be a college town, there’s likely one nearby. Check out what opportunities are available for local residents, such as auditing classes, use of athletic facilities and traveling performances by theatre groups, authors or artists.

Also, see what your library has going on. Many offer a range of classes taught by locals who specialize in a specific topic, whether it’s religion, technology or archeology.

By making the most of your surroundings, the town you’ve been living in all along can become a desirable retirement locale in its own right. Retirement hubs aren’t just about warm weather and sandy beaches, but also staying busy and experiencing new things. Consider both options, and when you decide whether you’d rather stay nearby or set out for a new destination, visit us and we will help you create a financial strategy that you can feel confident about.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives.

This material has been prepared for our firm and contains general information to help you understand basic financial planning strategies that may help you work towards your financial goals. Please understand that I cannot make any promises or guarantees that you will accomplish such goals.  All investments are subject to risk including the complete loss of principal.

Throughout, we may generally discuss different financial vehicles; however, nothing contained herein should be construed as a recommendation to buy or sell any financial vehicle, nor should it be used to make decisions about your investments.

The information contained in this material has been obtained from third party sources believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.
If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

The Media that Cried “Crisis”

The word “crisis” has become quite popular in our 24-hour news cycle. It’s a word media outlets have attached to everything from student loans to weight gain to a national shortage of biscuits in an attempt to maximize the eyeballs on their content.

[CLICK HERE to read the article, “The Great British Biscuit Crisis is finally over,” from The Independent, April 7, 2016.]

[CLICK HERE to read the article, “The Strange Case of the Missing Crisis,” from The Wall Street Journal, April 8, 2016.]

However we believe most, if not all, of the issues labeled as “crises” can be solved over time, whether it’s with a long-term plan, a change in legislation or perhaps new personnel brought in at the next election.

Take, for example, the “retirement savings crisis.” It’s a term we may have heard used to describe the national financial situation, but at the individual level, it doesn’t really become an issue unless you were to run out of money. Nobody wants to leave the workforce only to realize they didn’t have enough money saved up, but we believe this is one potential challenge that can be resolved before it happens, even before you retire.

For example, you may be able to reposition income-producing assets now to become guaranteed fixed income-producing assets later.* We’re happy to consult with you about how this can be accomplished, and help determine whether it’s a viable option for your individual financial situation.

[CLICK HERE to read the article, “How to Solve America’s Retirement Crisis,” from Time, 2016.]

When it comes to finances, the challenges you may encounter differ from anybody else’s. During the last recession, generally middle- and lower-class workers got hit the hardest. Many homeowners became renters, and some renters became homeless. Meanwhile, some higher net worth folks reined in spending, so second homes and other luxuries got put on hold.

[CLICK HERE to read the article, “American Dream Lost: Financial Crisis Created Massive Shift of Homeowners to Renters,” from News One, April 8, 2016.]

[CLICK HERE to read the article, “How to Solve the Housing Crisis: More Lawyers,” from Bloomberg, April 8, 2016.]

[CLICK HERE to read the article, “Election, economy hit vacation homebuyers where they live,” from CNBC, April 6, 2016.]

A financial professional may be able to help you create retirement strategies using a variety of insurance and investment products to help you meet your retirement income goals. If you have questions or need assistance, please keep us in mind.

*Any guarantees and protections are provided by insurance products including annuities that are backed by the financial strength and claims-paying ability of the issuing insurer.

This material has been prepared for our firm and contains general information to help you understand basic financial planning strategies that may help you work toward your financial goals. Please understand that we cannot make any promises or guarantees that you will accomplish such goals.  All investments are subject to risk including the complete loss of principal.

Throughout, we may generally discuss different financial vehicles; however, nothing contained herein should be construed as a recommendation to buy or sell any financial vehicle, nor should it be used to make decisions about your investments.

The information contained in this material has been obtained from third-party sources believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.
If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.