TAKING STOCK: Bolster a shaky retirement account with these 9 stocks

Dear Mr. Berko:

We're in our early 50s and are good savers. The house we bought for $127,000 in 1989 is paid for. We didn't take out home equity loans like many of our neighbors did. We have a 6-year-old car and a 9-year-old van, both paid for. We have no credit card debt.

Both of us work for the State of Illinois, and we're afraid that our under-funded retirement accounts will be gone when we retire. Together we make $116,000 and have $278,000, which includes EE and E bonds, six utilities with a reinvestment plan and $65,000 in savings.

We want to put $35,000 in dividend growth stocks for our retirement. We hope we can work at least 15 more years and collect Social Security. Please tell us what to buy for long-term income during our retirement years.

SD, Aurora, Ill.

Dear SD:

Holy marbles. Bet you have no kids! You folks need to become better consumers. You're setting a bad example for your contemporaries, and if other Americans imitate your spending habits, our economy's going to be in worse trouble!

Lots of other Illinoisans are - with good reason - also concerned about their state's retirement plan. Illinois has the second most crooked legislatures in the universe. (Recently, a Moline reader grumbled that several of his family members became millionaires while serving in the legislature.) However, the Illinois pension plan reminds me of a clapboard, tarpaper and plywood shack sitting up on cinderblocks and leaning like an elephant with a broken back. And our social security system doesn't look much better.

But if you good folks continue to conserve and invest successfully, the growing value of your assets could reach a dollar amount that may preclude you from collecting full social security benefits. In the coming 15 years, your Congress will certainly apply a "means test" that may well exclude you from those monthly checks. It's kinda like a catch-44, which is twice as bad as a catch-22!

Following is a list of some stocks I like. Each has a low payout ratio, each yields better than 4 percent, and I think each is capable of double-digit dividend growth over the coming five years.

- Vodafone Group (VOD-$27.31) provides mobile phone service to 380 million customers. VOD yields 6.9 percent and should grow its dividend 12 percent annually.

- Lockheed Martin (LMT-$75.46) is an important military-defense and aerospace contractor. LMT yields 5.3 percent, and the dividend can grow 13 percent annually.

- Raytheon (RTN-$40.01) is a huge government defense contractor and yields 4 percent. I think its dividend can grow 12 percent a year.

- Intel Corporation (INTC-$22.22) is the largest chip maker in the world. It yields 4 percent, and its dividend should grow by 10 percent annually.

- Molex (MOLX-$21.12) is a $3.6 billion manufacturer and designer of electronic components. MOLX yields 4 percent, and the dividend can grow 14 percent annually.

- Avista (AVA-$24.81) is an electric utility in Washington State. Its current dividend yields 4.5 percent, and 10 percent annual dividend growth is on track.

- Wisconsin Energy (WEC-$30.19) is a fine utility that yields only 3.6 percent but is capable of raising its dividend by 15 percent annually.

- Unilever (UL-$31.51) is a worldwide producer of consumer consumables. The dividend yields 4 percent, and a 10 percent annual dividend growth should be the norm.

- Finally, Sempra Energy (SRE-$52.53) is a diversified utility company out of San Diego. The dividend yields 4 percent, and 10 percent annual increases should be expected.

If you invest $35,000 in these eight issues, your current return will be 4.4 percent - or $1,540 in first-year income. However, if you reinvest the dividends each quarter for 15 years, your annual income should be in the neighborhood of $8,300 a year. And that's a 27 percent dividend return on your $35,000 investment.


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.

© 2011 Creators Syndicate Inc.

Published: Mon, Oct 31, 2011