5 Tips To Build A Dividend Income Stream For Retirement

Posted on: 6 December 2021

Do you want to create a stream of income for your retirement? One way more and more Americans are doing this is to invest in companies that pay regular dividends and treat this injection of cash like an income. However, for a dividend income plan to work, you must approach it the right way. To help you do this, here are a few important steps to take both now and during retirement. 

1. Consult an Advisor. Trying to design such a specific path for your investments can be challenging for the average investor. To find the right stocks, the right growth, and the right reinvestment or withdrawal schedule requires understanding the stock market at a deeper level than just buying into your company's 401(k). The best way to do this is to work with an investment advisor who understands your goals. 

2. Look At Company History. If you need to find reliable dividend stocks, you'll need to consider each company's history of payments and growth. A dividend-based income portfolio has less room for error than one just looking for growth over the long term. What are you looking for? A solid history of paying out dividends with regular growth of the percentage of such dividends. 

3. Start During Savings Years. If dividend income is your retirement goal, start during your savings years. This gives you the chance to find and invest in quality stocks that provide you with your own history of dividend returns. And reinvestment during your working years will grow that portfolio faster, providing a higher dividend return later. 

4. Don't Forget Diversification. Nearly all investment strategies should include diversification to protect you against individual events that lower one stock's performance. Dividend income portfolios are no different. Invest in different companies from different industries and physical locations. The tendency when one finds a stock with high dividend yields is to get too heavily weighted in it, so remain balanced. 

5. Avoid Obsessing. An investor on a very tailored path can become obsessed with details. You do need to research companies, stocks, and growth, but remember that this is a long-term strategy. If you've diversified and done your homework, don't panic if individual companies rise or fall during a given quarter. You'll want to pay attention to patterns, not worry over every blip.

Want more help creating a dividend-paying portfolio? No matter what stage of retirement planning or withdrawal you're in, the best place to begin is by consulting an investment advisor in your state today. Together, you can ensure a healthy income stream that allows you to enjoy retirement the way you want. 

For more information, consult an investment advisor near you.