Wednesday, March 18, 2020

3 Dividend Stocks To Avoid The Social Security Blues

As a fiscal conservative, the direction of our country concerns me. 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.

Here are some important facts about Social Security:

According to the Social Security Administration, in 2018 over 67 million Americans received 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.

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.
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:
Microsoft (MSFT), the world's largest software company, develops PC software, including the Windows operating system and the Office application suite. The company has paid a cash dividend to shareholders every year since 2003 and has increased its dividend payments for 18 consecutive years. Yield: 1.2%

Illinois Tool Works Inc. (ITW) is a diversified manufacturer that operates a portfolio of 60 business units that serve industrial and consumer markets globally. The company has paid a cash dividend to shareholders every year since 1933 and has increased its dividend payments for 56 consecutive years. Yield: 2.7%

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 57 consecutive years. Yield: 2.8%
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 MSFT, ITW, JNJ,

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