Depending On Cash Dividends In Retirement Could Be A Mistake

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Many retirees today purchase cash dividend stocks as another source of income during their retirement. 

While there are several positive attributes of cash dividends, they all carry a risk….and uncontrollable risk: The dividends may be reduced at any point in time or stop completely.  You have no control over the amount or timing of any corporate dividend. Namely, we are referring to cash dividends from publicly traded companies listed on an Exchange, such as the New York Stock Exchange or the NYSE MKT (formally known as the American Stock Exchange), and NASDAQ.   

Company Dividend History

There are companies that are known for paying cash dividends and have a history of successful distributions. 

But that list is shrinking, and there is an increasing number of companies cutting back on cash dividends and stock dividends. The volatility of the US Markets is having a major impact on company and stock performance as well as the global economic, political, and social conditions. More pressures are being placed on companies to perform and meet or exceed shareholder expectations because everyone enjoys a “good return on investment.” The bottom line is that the balancing act of keeping shareholders happy with good returns, keeping enough capital on hand to run the business, and meet the ever-growing challenges of daily operations, a toll is being taken on cash dividends.  

Research from

A recent research article from  entitled “The Unreliability of Dividend Income Throughout a 30-year Retirement” noted the ever-increasing volatility and shrinking list of companies paying cash dividends. They noted five reasons why there is a shift away from paying dividends or reducing them. 

(1) Company failure to change with the times, (2) Incompetent management, (3) Took on massive risks, (4) Debt burden became unsustainable, and (5) Public faith and sales plummeted. Here are just a few well-known companies that have cut, suspended, or stopped quarterly dividends during the last few years:  

Bank of America – from 64 cents per share to 32 cents, to .1 percent for some quarters.

Citigroup – from 54 cents per share to 32 cents, then 16 cents, to suspended, back to 1 cent.

Ford Motor Company – from 5 cents per share, suspended for six years, back to 5 cents.

General Motors – from 50 cents per share to 25 cents, suspended, then back to 30 cents. 

Kodak – 50 cents per share, then 40 cents, then 25 cents, and then completely suspended. 

Washington Mutual – 56 cents per share, to 15 cents, then down to 1 cent per share.

A quote From Warren Buffett — Warren Buffet’s Berkshire Hathaway has never paid a dividend. Warren believes that any company paying a dividend is saying, “we don’t know how to use this extra money to grow our share price, so you take it and see what you can do with it.”  

What if I Need Steady Income? 

The most important concept to remember about cash dividends is that you are not in control of the amount or the timing of when they may be paid. If you are dependent on cash dividends to cover any required retirement expenses, you may find yourself without an income stream or a reduced income amount to pay your bills. Why take the risk with your retirement money when there are other and more stable alternatives.

According to a 2020 study, over 50% of dividend investors use Income Annuities to help safeguard their retirement portfolio.

Since investors purchase cash-paying dividend stocks mostly for income purposes, what can you do if you want steady and guaranteed income? We suggest you consider using an Income Annuity to protect your portfolio and provide the ongoing cash payments that can be paid for a certain period or even for the remainder of your life. Income Annuities are not always the most appropriate solution, but in many cases, if you need the reliable income that you cannot outlive, then it is worth exploring this option. Your funds are guaranteed and protected from loss by the insurance company, and they are the only institution that can guarantee an income stream and still grow your funds. 

For more information on Dividends, here are some websites you can visit:


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