Tags: motley fool | social security | dividend | investors

Motley Fool: 3 Stocks to Supplement Your Pitiful $4 Social Security Hike

Motley Fool: 3 Stocks to Supplement Your Pitiful $4 Social Security Hike

(Getty/William Thomas Cain)

Friday, 21 October 2016 08:49 AM


 

 

The Motley Fool recently suggested a trio of stocks it says can provide a nice boost to your retirement income.

And let's face it: with the average Social Security recipient expected to get a $4 monthly increase in benefits, every additional cent will count.

If the government won't help you make financial ends meet, then it is up to you to become a savvy investor, seek professional advice and plan your own economic future.

The Fool explains that Amgen, Deere & Co, and McDonald's all offer above-average dividend yields that could provide a nice boost to your retirement income.


“More importantly, they're well positioned to supplement your benefits with increasing payments for years to come,” the Fool explained.


"Fear of political backlash over escalating prices has depressed drugmaker stocks across the board. Shares of blue-chip biotech Amgen have been trading at just 16.7 times trailing earnings, offering a dividend yield around 2.5%. With the average stock in the S&P 500 sporting a trailing PE ratio around 24.3, and a 2.15% dividend yield, it's too cheap to ignore," the Fool said.


"While sales growth has been steady over the past five years, Amgen's focus on efficiency has allowed operating profits to grow a stunning 112.3%. It's been using its profits to grow its dividend at a blazing pace, while building a stable of potential new blockbusters (drugs that generate over $1 billion in annual sales) that includes a next-generation cholesterol drug that could add more than $4 billion annually to its top line," the Fool said.

As far as Deere, it  "has benefited from the constant need for increased agricultural efficiency for generations. With an iconic brand, and an enormous network of equipment dealers, it's well positioned to continue growing, with some dips along the way.
Heavy equipment sales are fairly cyclical, and Deere is in a rut along with its industry peers. While the company increased its dividend 114% since 2010, the quarterly payout has been frozen at $0.60 per share since 2015. At recent prices, the stock offers a nice 2.8% yield at a comfortable 48.5% payout ratio."

Finally, "if you can't digest cyclical growth, perhaps the 41-year track record of increased dividend payments at McDonald's will whet your appetite. The company suffered a revenue freefall in recent years but remains one of the world's most recognizable brands. With 36,000 locations, the leading restaurant chain also enjoys economies of scale that allow it to profit at price points its smaller competitors can't match. These competitive advantages, and a plan to refranchise 4,000 restaurants by the end of 2018, should allow it to continue raising payments throughout your retirement."
 

Meanwhile, millions of Social Security recipients and federal retirees will get a 0.3 percent increase in monthly benefits next year, the fifth year in a row that older Americans will have to settle for historically low raises, the AP reported.

There was no increase this year. Next year's benefit hike will be small because inflation is low, driven in part by lower fuel prices.

The federal government announced the cost-of-living adjustment, or COLA, Tuesday morning. By law, the COLA is based on a government measure of consumer prices.

The COLA affects more than 70 million people — about 1 in 5 Americans.

The average monthly Social Security payment is $1,238. That translates into a monthly increase of less than $4 a month.

And so even if your retirement portfolio bets pay off, just how much cash will you need to thrive and survive in your "golden years"?

Well, ask a different adviser and you'll get a different answer.

Retirees now need to save $1 million if they want to get half of their income from relatively low-risk Treasury investments, according to new research from Michael Thompson and his co-authors at S&P Capital IQ. That's up from the $200,000 to $300,000 they needed to save to reach the same financial goal between 1990 and 1997 in inflation-adjusted dollars, Thompson told USA Today.

The reason retirees need so much more now? Rock-bottom interest rates on safe investments like Treasurys are to blame, USA Today explained. "It's startling to think like this," says Thompson. "Rates are so low, in order for you to not take exceptional risk to try to have a reasonable retirement portfolio, you need a million dollars in assets."

(Newsmax wire services contributed to this report).


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The Motley Fool recently suggested a trio of stocks it says can provide a nice boost to your retirement income.
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2016-49-21
Friday, 21 October 2016 08:49 AM
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