The Power of Dividends

For investors that consider themselves "pre-retirees" or "young retirees" one of the greatest challenges is to generate enough income to fund their retirement, both now and more importantly in their later years when inflation may have taken its toll.  With today's low interest rates, many investors are turning to equities, using dividends to supplement their retirement income.

The advantages are clear, a recent study concluded that 238 companies in the S&P 500 pay a dividend that is greater than the current yield on the 10 year US Treasury Bond. And unlike the interest paid on bonds, dividends historically have increased over time. Over the last 20 years, the dividends paid on the S&P 500 have averaged a 5.3% increase per year.  Over the same period the CPI has increased on averaged by 2.4% per year. While never guaranteed and always subject to change or elimination, dividend income has been a great tool in the battle against inflation.

We believe that income hungry investors will focus on dividend paying stocks for years to come. With this in mind, we have created a strategy that invests in high quality, dividend paying companies that have a history of growing their dividends.  We also utilize research that assesses the potential for future dividend increases.  Our stated objective for this strategy is to double the investment income  over 7 years.  If you are interested in unleashing the power of dividends in your portfolio, give us a ring!

 

 

Stocks offer long-term growth potential, but may fluctuate more and provide less current income than other investments. An investment in the stock market should be made with an understanding of the risks associated with common stocks, including market fluctuations.

Wells Fargo Advisors did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed.  The opinions expressed in this report are those of the authors and are not necessarily those of Wells Fargo Advisors or its affiliates.  The material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.