logo
  Join        Login             Stock Quote

4 Dividend Stocks To Avoid The Social Security Blues

 January 03, 2013 11:49 PM
 


As a fiscal conservative, the direction of our country concerns me. With the current administration's primary focus on fixing the budget deficit with higher taxes on the "wealthy", rather than a combination of higher revenue AND meaningful spending cuts, our country is left in a perilous situation. I am reminded of the following quote:

"The problem with Socialism is that eventually you run out of other people's money."

- Margaret Thatcher

If you have followed the U.S. Social Security saga over the last several years, you know it is projected to run out of money soon. As it turns out "soon" just may be much sooner than previously expected. To make matters worse, it has been "broke" for some time, but through creative accounting that would land a private-sector CFO in jail, the government has been able to keep the appearance of solvency.

[Related -Can Abbvie Inc (NYSE:ABBV) Trump Gilead Sciences, Inc.'S (NASDAQ:GILD) HCV Lead?]

Here are some important facts about Social Security:

According to the Social Security Administration, in 2011 over 60 million Americans received $736.1 billion in Social Security benefits, making it the nation's biggest social program.

Social Security is transforming from an operation that's helped finance the rest of the government for decade into a cash drain that will need to be fed large sums of cash.

[Related -Coca-Cola Company (KO) Dividend Stock Analysis]

Since 1983, when it suffered a cash crisis, Social Security has been collecting more in taxes each year than it has paid out in benefits. It has used the excess to buy the Treasury securities that go into the trust fund, reducing the Treasury's need to raise money from investors. Put another way, there is no money in the Social Security Trust Fund - just IOUs from the government to itself.

Social Security is a pay-as-you-go program. In 2010, the annual shortfall was $62 billion. That amount is expected to grow each year. It faces a shortfall of roughly 25 percent when the Social Security Trust Fund is exhausted some time around 2036.

Do you really want to bet your retirement on a system like this? I certainly don't. When planning for retirement, my underlying assumption is that Social Security will go broke before I ever receive a dime. Like everyone, I will need an income during my retirement years. I am currently planting the seeds for that income with high-quality dividend stocks that have a long track record of increasing their dividends each year. Below are some blue chip dividend stocks that eventually end up in most income investors' portfolio:
The Coca-Cola Company (KO) is world's largest soft drink company, KO also has a sizable fruit juice business. The company has paid a cash dividend to shareholders every year since 1893 and has increased its dividend payments for 50 consecutive years. Yield: 2.8%

Johnson & Johnson (JNJ) is a leader in the pharmaceutical, medical device and consumer products industries. The company has paid a cash dividend to shareholders every year since 1944 and has increased its dividend payments for 50 consecutive years. Yield: 3.5%

Genuine Parts Co (GPC) is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products. The company has paid a cash dividend to shareholders every year since 1948 and has increased its dividend payments for 56 consecutive years. Yield: 3.2%

Emerson Electric Co. (EMR) designs and supplies product technology, and delivers engineering services and solutions to a wide range of industrial, commercial, and consumer markets around the world. The company has paid a cash dividend to shareholders every year since 1947 and has increased its dividend payments for 56 consecutive years. Yield: 3.1%

As for Social Security running out of money, people will be paid what was promised since the government can print all the money it needs. However, what was promised may not be enough after inflation, particularly if a lot of money is printed.

Full Disclosure: Long KO, JNJ, GPC, EMR. See a list of all my dividend growth holdings here.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageChipotle Mexican Grill, Inc. (CMG) Q2 Earnings Preview: Will Higher Traffic Offset Higher Costs the Key

Chipotle Mexican Grill, Inc. (NYSE:CMG) will host a conference call to discuss second quarter 2014 read on...

article imageNetflix, Inc. (NFLX) Q2 Earnings Preview: The Ruby Month for a Reason

Netflix, Inc. (NASDAQ:NFLX) will post its second-quarter 2014 financial results and business outlook on its read on...

article imageLadenburg Thalmann Financial Services (NYSEMKT:LTS): Heavy, Durable Insider Buying

Ahh, but any worries over price levels didn’t stop multiple insiders at Ladenburg Thalmann Financial read on...

article imageInternational Business Machines Corp. (IBM) Q2 Earnings Preview: Small Beat and Pop

International Business Machines Corp. (NYSE:IBM) will host a conference call Wednesday, Jul. 16, 2014 at read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.