3 Dividend Stocks Paying 10% to 16% That Can Fund Your Retirement

My 36 Month Accelerated Income Plan is a guide for individuals who see retirement looming in a few short years and who want to build up their retirement savings as much as possible. The plan provides a systematic approach that can be started at any time and does not require timing the market. A recent subscriber question about picking three stocks to start her 36 Month Accelerated Income Plan was the catalyst for this article.

The plan is based on using dividend reinvestment of high yield stocks. After a decade of very low interest rates from most types of income assets, the investing world has lost touch with the power of compound growth when the yields are high enough. The 36 Month Accelerated Income Plan uses high yield stocks and automatic reinvestment of dividends to quickly grow the income potential of money you have set aside for income in your retirement years.

One example used in the 36 Month Accelerated Income Plan shows how a $150,000 starting amount could be producing a monthly income of $3,300 after just three years. That’s $39,600 in annual income. Here are some of the success factors that you need to keep in mind and employ.

  • Higher yield is better. Compound growth is powered by yield. For example, $10,000 compounds to $11,600 in three years at 5%. It grows to $13,450 at 10%, a 115% gain in growth.
  • The dividend payments from the selected stocks must be expected to continue for the three years and longer. This is the hard part of the strategy, and you may need to change stocks if individual company business results change.
  • The plan focuses on compounding the income stream, not the account value. This means that temporary share price drops are a good thing, allowing you to buy more shares with the reinvested dividends when share prices are down, boosting your income at an even rate.
  • The focus will be on the dividend income growth, which will become retirement income in the future. That income will compound even faster than your account value will grow.
  • You can boost your retirement results by making regular added investments to your high-yield stock holdings.

To help you get started, here are three stocks with yields greater than 10% and a current positive outlook that the dividend rates will continue.

Uniti Group Inc. (Nasdaq: UNIT) is a real estate investment trust (REIT) that owns telecommunications network assets. The company was spun-off by Windstream (Nasdaq: WIN) in 2015 to own a large portion of WIN’s fiber and copper wireline network.

Since its IPO, UNIT has grown through the acquisition of additional fiber networks and cell tower assets. Controversy around how Windstream spun-out UNIT has lead to the current low share price/high yield of UNIT. Those problems should not affect UNIT and the current dividend rate is well covered by distributable cash flow.

The shares currently yield 11.6%.

New Residential Investment Corp. (NYSE: NRZ) is a finance REIT that owns a diversified portfolio of residential mortgage related assets. This has been one of the great high-yield investments of the last five years.

The company invests at the edges of the mortgage business including mortgage servicing rights and mortgage backed securities call rights.

Over the last few years, New Residential has expanded its ability to become a full service mortgage origination and servicing companies. These new capabilities have not yet made a meaningful difference to the business results, but they will.

The NRZ dividend has grown slowly and steadily. The stock currently yields 10.9%.

The InfraCap MLP ETF (NYSE: AMZA) is an exchange traded fund (ETF) that owns an actively managed portfolio of master limited partnerships (MLPs). The MLP sector is comprised of publicly traded partnerships that provide energy infrastructure services such as pipeline, storage terminals, export facilities and processing services.

AMZA boosts the already high yields of the MLP sector by selling call options on the fund’s portfolio holdings. The returns of AMZA have been comparable to other MLP focused funds. Admittedly, the sector has been in a bear market since early 2016 and is just recently started to recovery. The options selling supported high yield boosts the effect of dividend reinvestment with this fund, leading to outperformance when using a reinvestment strategy.

AMZA currently yields 16%.


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7 Best ETFs for Investors Wondering How to Start a Retirement Fund

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Figuring out how to start a retirement fund can be a daunting task for any investor, but that is especially true for younger, novice investors that are nowhere near retirement age.

Investors wondering how to start a retirement fund do not need to scramble for ideas and vehicles to immediately start retirement planning. Easy-to-access instruments include 401k plans (for some workers) and individual retirement accounts (IRAs).

“You may want to think about opening an IRA in addition to or instead of a 401k plan if your employer doesn’t offer one. Even if you have a 401k, you may have more investment choices through an IRA,” according to Bank of America Merrill Lynch. “Whether you choose a Traditional or Roth IRA will depend largely on your income and age. (If you’re a small business owner, you may also be able to contribute to a small business IRA).”

For novice investors pondering how to start a retirement account, exchange-traded funds and mutual funds are excellent places to start for a number of reasons, including the ability to bolster portfolio diversification and access multiple asset classes.

With that in mind, here are a few ideas for investors wondering how to start a retirement fund.

ETFs for Starting a Retirement Fund

Vanguard Total Stock Market ETF (VTI)

Vanguard Total Stock Market ETF (VTI)

Expense Ratio: 0.04% per year, or $4 annually per $10,000 investment

Home to $101.8 billion in assets under management at the end of July, the Vanguard Total Stock Market ETF (NYSEARCA:VTI) is the third-largest U.S.-listed ETF by assets. Across its various share classes, the Vanguard Total Market Fund is one of the largest index funds in the world with nearly $726 billion in combined assets under management.

Not only that, but VTI is cheap. Really cheap. Its annual fee of just 0.04%, which makes it less expensive than 96% of competing funds, according to Vanguard data. Focusing on fees is an important factor for investors wondering how to start a retirement fund because when investing for the long-term, the more an investor saves on fees, the more his or her capital grows.

Another element investors pondering how to start a retirement account need to consider with equity investments is broad-based exposure. VTI delivers on that with a roster of more than 3,650 stocks, or more than seven times the number of components found in the S&P 500.

ETFs for Starting a Retirement Fund

iShares Core S&P U.S. Growth ETF (IUSG)

iShares Core S&P U.S. Growth ETF (IUSG)

Expense Ratio: 0.04%

Younger investors pondering how to start a retirement account should remember that they have the benefit of time, meaning some of their investments should be aggressive in nature. Growth stocks fit the bill as aggressive plays.

The iShares Core S&P U.S. Growth ETF (NASDAQ:IUSG) offers cost-effective exposure to a broad basket of domestic large- and mid-cap growth stocks. This $5.11 billion ETF, which turned 18 years old in July, tracks the S&P 900 Growth Index and holds 543 stocks.

Something else investors wondering how to start a retirement account should remember about growth strategies is that this investment factor typically leans toward the technology and consumer discretionary sectors. IUSG allocates nearly 57.50% of its combined weight to those sectors compared to just under 39% in the S&P 500.

ETFs for Starting a Retirement Fund

Invesco QQQ (QQQ)

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Invesco QQQ (QQQ)

Expense Ratio: 0.20%

Keeping with the theme of younger investors being aggressive in the earlier stages of establishing retirement accounts, the Invesco QQQ (NASDAQ:QQQ) is a fund worthy of consideration.

QQQ, which tracks the Nasdaq-100 Index, is home to 103 stocks, nearly 61% of which are classified as growth stocks. And if the exposure to technology and consumer discretionary stocks in a typical growth fund is not enough, QQQ devotes over 82% of its roster to those two sectors.

QQQ is also an appropriate vehicle for investors looking for exposure to each of the FAANG stocks. Those five stocks combine for approximately 40% of the ETF’s weight.

ETFs for Starting a Retirement Fund

WisdomTree U.S. LargeCap Dividend Fund (DLN)

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WisdomTree U.S. LargeCap Dividend Fund (DLN)

Expense Ratio: 0.28%

A frequently asked question when wondering how to start a retirement fund is how to generate income. Dividend-paying stocks are a key component of that equation and the WisdomTree U.S. LargeCap Dividend Fund (NYSEARCA:DLN) is one of the better dividend ETFs to consider.

DLN is not a yield-focused strategy, nor does it take into account for how many years a company has boosted its payout. Rather, the fund’s underlying index, “is dividend weighted annually to reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share,” according to WisdomTree.

DLN’s expense ratio is higher than some of the legacy funds in this category, but DLN also warrants that fee because, over long holding periods, it has handily outperformed some of its cheaper rivals. The fund, which yields almost 2.50% on a trailing 12-month basis, allocates about 45% of its combined weight to the technology, financial services and healthcare sectors.

ETFs for Starting a Retirement Fund

Vanguard Intermediate-Term Corporate Bond ETF (VCIT)

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Vanguard Intermediate-Term Corporate Bond ETF (VCIT)

Expense Ratio: 0.07%

Investors wondering how to start a retirement account should remember that diverse, effective retirement planning also includes some fixed income exposure. The Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ:VCIT) can help with that.

Historically, investment-grade corporate bonds are not significantly more volatile than U.S. government debt, but corproates do offer a better income profile, making this an ideal, lower risk asset class for retirement-minded investors. VCIT holds over 1,700 bonds, but over a third of its portfolio comes via financial services issuers.

“The strategy’s five-year annualized return through June 2018 of 3.5% matched the category average. The portfolio’s low fee helped it produce the competitive return against its peers that dabble in higher-yielding junk bonds,” according to Morningstar.

ETFs for Starting a Retirement Fund

Invesco S&P SmallCap 600 Pure Value ETF (RZV)

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Invesco S&P SmallCap 600 Pure Value ETF (RZV)

Expense Ratio: 0.35%

Historical data confirm that one of the most potent factor combinations is size and value. Novice investors pondering how to start a retirement fund should include small-cap and value stocks in that fund. The Invesco S&P SmallCap 600 Pure Value ETF (NYSEARCA:RZV) conveniently does that and has been one of the best-performing small-cap funds during the current bull market in U.S. stocks.

RZV tracks the S&P SmallCap 600 Pure Value Index and holds 165 stocks with an average market capitalization of just over $1 billion. Over longer holding periods, RZV has been less volatile than broader small-cap benchmarks, such as the Russell 2000 Index.

Although it is a value fund, RZV allocates over 35% of its weight to the consumer discretionary sector, a group often associated as a growth destination. Industrial and financial services names combine for over 28% of RZV’s weight.

Over the past three years, which were a trying time for value stocks, broadly speaking, RZV has outpaced the large-cap S&P 500 Value Index, by 320 basis points.

ETFs for Starting a Retirement Fund

How to Start a Retirement Fund: ProShares Investment Grade—Interest Rate Hedged (IGHG)

ProShares Investment Grade–Interest Rate Hedged (IGHG)

Expense Ratio: 0.30%

If you’re wondering how to build a retirement account in a rising interest rate environment, a newer breed of bond funds offer protection against Federal Reserve tightening cycles. The ProShares Investment Grade—Interest Rate Hedged (BATS:IGHG) was one of the first ETFs to offer income and rising rates protection under one umbrella.

IGHG has a minuscule net effective duration of 0.04 years and arrives at the reduced sensitivity to rising rates by “including a built-in hedge against rising rates that uses short positions in U.S. Treasury futures,” according to ProShares.

Traditionally, short-term bond funds mean less income as the trade-off for reduced rate risk, but that is not the case with IGHG. The ProShares fund offers a solid 30-day SEC yield of 4.04%, which is exceptional among rate-hedged and investment-grade bond funds.

As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.

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Market Preview: Possible Trade Deal with Canada, Earnings from Dollar Retailers, Lululemon

Good news on several fronts is keeping the market in rally mode this week. A trade deal with Mexico, and what appears to be an imminent deal with Canada, have come much quicker than most pundits believed possible. GDP numbers released Wednesday morning revealed a 4.2% growth rate, the highest in 4 years. With Apple (AAPL) up on the trade news, Morgan Stanley fueled the fire even more by raising price targets on both Alphabet (GOOG) and Amazon (AMZN). Both the Nasdaq and S&P 500 hit record highs for the fourth straight session.

Thursday morning Dollar Tree (DLTR) and Dollar General (DG) trot into the earnings arena. While Dollar General has done well this year, bouncing back from an earnings disappointment at the end of May, Dollar Tree has been hammered after earnings reports in both March and May. Both companies blamed the weather for last quarter’s disappointment, which apparently contributed to lower sales and raised costs. Lululemon will report earnings after the close. The stock has been on a major run this year, and will need to report a perfect quarter to continue the blistering pace. Analysts expect new CEO Calvin McDonald to report an earnings increase of just over 25% when the athletic retailer takes the spotlight.

Thursday’s economic calendar includes jobless claims, the EIA natural gas report, and personal income and outlays. Income is expected to rise .3% and spending is expected to rise .4%. The core PCE Core Price Index, which is closely watched by the Fed as it sets interest rates, is expected to rise .2% for a year-on-year gain of 2%, which happens to be the Fed’s target. Friday, the last day of August, investors will see Chicago PMI, consumer sentiment, and Baker-Hughes rig count numbers. Consumer sentiment is expected to rise slightly after a sharp downturn in July. The preliminary August report was the lowest since September of last year, with consumers still fretting over the then unsettling trade tariff news.

The lone earnings report delivered Friday morning will come from discount retailer Big Lots (BIG). Last quarter same-store sales fell a whopping 3%, and the stock breached a two year low before recovering and staging a rally. Analysts will be watching to see if the Big Lots earnings are on the mend, or if the retailer will continue to stumble through the rest of 2018. Traders may want to keep an eye on what technicians call a cup and handle pattern which could be forming in the stock.

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