Retirement: 3 Top Dividend Stocks Yielding Up to 9.4%

Dividend StocksA study from 2010 found that the majority of Americans were more afraid of outliving their retirement savings than they were of dying. What’s happened since then? Americans have witnessed a spectacular bull run, so we must be more prepared for retirement right? Not really. Most of us are living paycheck to paycheck. But there is a way for investors hoping to retire to add some serious depth to their retirement savings. That’s with high-yield dividend stocks and companies that consistently raise their annual dividend yields.

Federal Reserve Depletes Retirement Savings

Thanks to four rounds of quantitative easing and artificially low interest rates, the Federal Reserve has taken the income out of fixed income assets like CDs, bonds, and Treasuries. That’s terrible news for anyone who was hoping their fixed income investments would help carry them through retirement.

It’s especially bad news when you consider the fact that the average monthly payout for Social Security is just $1,341. That’s just the average—which can be skewed by those who make a lot…or a little. Most Americans can look forward to a monthly Social Security check between $700.00 and $1,800. That’s not much to live on.

And it’s almost impossible for the majority of Americans to save for retirement, too. According to the most recent data, most Americans are one paycheck away from bankruptcy. Roughly 63% of Americans do not even have $500.00 set aside for an unexpected emergency. (Source: “Most Americans are one paycheck away from the street,” MarketWatch, January 31, 2016.)

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These findings echo a report by the Federal Reserve in 2013 that found savings for many households have been depleted after the recession. Among those who actually had savings before the 2008 financial and subprime housing crisis, 57% said they used up some or all of their savings during the Great Recession. (Source: “Report on the Economic Well-Being of U.S. Households in 2013,” Federal Reserve, August 15, 2014.)

Despite the hot wind coming from Capitol Hill about jobs, jobs, jobs, and wage growth, that number is actually up slightly from the 62% of respondents who said the same thing in 2015. If hit with an emergency, the average American would have to cut back spending elsewhere (23%), borrow from family or friends (15%), or using credit cards (15%).

Without emergency funds, Americans will not have money to cover unforeseen expenses, let alone the rising costs of utilities or groceries. They’ll be forced to raid their retirement savings.

Reliability Among Stock Market Chaos

That’s why it’s so important for those nearing retirement to find other ways to supplement their income. But again, the low interest rate environment is making that extremely difficult.

That’s why so many investors have been pouring money into the stock market. It’s the only game in town left to play.

Sure, the Federal Reserve raised its key lending rate in December for the first time in nearly a decade, but recent weak economic data out of the U.S. and around the world means it’s likely the Fed will hold off on future rate hikes.

That is, at least until the economy improves. But that’s going to be difficult to do in an economy that gets roughly 70% of its gross domestic product (GDP) from consumer spending. It’s difficult to expect consumers to boost sustainable economic growth when they don’t have any money.

Fortunately, there is a way for investors to add some depth to their retirement fund. The stock market may be volatile and unpredictable right now, but there are a number of excellent stocks that have been bucking the trend. They also provide annual dividends near or above seven percent and the companies have been raising them consistently.

Why is that so important? It means that whether the markets are cycling up or down, these companies are rewarding investors with additional money. Money you can either cash out on or reinvest and take advantage of compounding interest.

3 High-Yield Dividend Stocks for a Low Interest Rate Environment

It isn’t difficult to find a stock that provides an annual dividend above seven percent. You just need to remember that when it comes to dividends, there’s a risk/reward payout: the higher the dividend the riskier the stock. And right now, most of the eye-wateringly high dividend stocks are found in the oil and gas sector.

Until oil and gas prices find a bottom, it might be better to consider high dividend stocks that are not related to commodity prices.

1. StoneMor Partners L.P. (NYSE:STON)

Deathcare may not be your idea of an exciting, fun industry, but it is recession-proof. StoneMor Partners is one of the largest owners and operators of cemeteries in the United States. It also provides an annual dividend of 8.98%, which it has raised for the last 11 consecutive years.

The company’s portfolio consists of 306 cemeteries and 103 funeral homes in 28 states and Puerto Rico. All told, the company owns more than 15,700 acres of land, equivalent to an aggregate weighted average sales life of more than 248 years. (Source: “StoneMor Partners L.P. Investor Presentation August 2015,” StoneMor Partners L.P., August 2015.)

StoneMor is also the only deathcare company structured as an MLP (master limited partnership). MLPs are required by law to distribute most, if not all, of their available cash to unit holders. This results in higher yields for investors. While most MLPs are in the energy sector, a few, including StoneMor Partners L.P., operate in other sectors.

Since the markets bottomed in March 2009, StoneMor’s share price has climbed approximately 420%. While other companies were cutting back on spending, StoneMor was raising its annual dividend.

The company currently pays an annual dividend of 8.98%, or $2.64 per share. As mentioned, the company has been raising its annual dividend for the last 11 years. Over that time, its annual dividend payout has increased 35%, from $1.90 in 2005 to $2.58 in 2015. (Source: “Distribution History,” StoneMor Partners L.P., last accessed February 2, 2016.)

2. Vector Group Ltd (NYSE:VGR)

Vector Group may not be the most well-known cigarette maker in the United States, but investors have been enjoying the company’s capital appreciation and dividend growth.

The fourth-largest cigarette manufacturer in the U.S., Vector’s “Pyramid,” “Grand Prix,” “Liggett Select,” “Eve,” and “Eagle 20’s” make up 12% of the discount market share of discount cigarette brands. The company also makes electronic cigarettes and is engaged in real estate and land development activities. (Source: “Vector Group Fact Sheet,” Vector Group Ltd, November 2015.)

The company has a market cap of $2.86 billion, a forward price-to-earnings multiple (P/E) of 29.6, and operating cash flow of $147.35 million. It also provides an annual dividend of 6.79%, or $1.60 per share. In 2015, the S&P 500 lost 0.7% of its value; investors of Vector Group saw the company’s share price increase 24.5%.

3. HCP, Inc. (NYSE:HCP)

Roughly 10,000 baby boomers retire each and every day. And HCP, Inc. helps them make the most of their golden years. It also makes investors a lot of money. The only real estate investment trust (REIT) included in the S&P 500 Dividend Aristocrats Index, HCP pays an annual dividend of 6.24%, or $2.26 per share, which it has raised for 31 consecutive years.

HCP, Inc. is a self-administered REIT that invests in, develops, and manages real estate that it leases to healthcare facilities. The company has more than $24.0 billion in assets under management. Its real estate portfolio consists of senior housing, post-acute/skilled nursing, life sciences, medical offices, and hospitals.

As a REIT, HCP is not subject to federal income tax if it distributes at least 90% of its taxable income to its shareholders. Since 2007, the year before the stock market began its precipitous fall, HCP raised its annual dividend 27%, from $1.78 in 2007 to $2.26 in 2015. (Source: “Dividend History,” HCP, Inc., last accessed February 2, 2016.)

While the company’s share price has been a little volatile as of late, at $35.75 per share, it is trading near a support level.