Tags: retire | rich | dividends

Retire Rich: Buy Stocks That Pay Healthy Dividends

By Marc Davis   |   Friday, 07 Aug 2009 01:42 PM

What's the best stock market investment strategy if you want to retire rich? Buying stocks you think will rise the most may not be your smartest bet.

Stocks which pay healthy dividends may be a better, less risky route to a wealthy retirement, writes Dan Caplinger for the Motley Fool, an online investment advice publication.

"If the last two years has taught us anything, it's that in addition to trying to maximize your returns, you also have to think about preserving capital and avoiding risk," says Caplinger.

"By demanding that companies pay you in order to invest in their shares, you screen out a lot of troublesome businesses and pick up some of the best stocks you can own," according to Caplinger.

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On retirement, when you leave your job or business, the paychecks stop coming. If you've bought growth stocks over the years, you'll have to liquidate some of your portfolio to get cash for daily expenses.

But, if you've bought dividend-paying stocks, some may yield more than U.S. Treasuries, bank CDs, various corporate bonds, annuities and other fixed-rate vehicles.

For example, AT&T currently yields 6.3 percent in dividends, AstraZeneca returns 6.5 percent, and Reynolds American returns a whopping 7.9 percent.

Consensus among many financial advisers, depending on an investor's goals, is to hold a diversified portfolio, limit downside exposure, and allocate assets between equities and fixed-rate vehicles.

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