Inflation has been quite a thorn in the side of retirees or semi-retirees who depend on a fixed income. The higher costs of living may have caused some to pursue higher-yielding plays, even at the cost of taking on a bit more risk (say, going for 5-7%-yielding dividend stocks over 4-5%-yielding risk-free assets).

In any case, taking on more risk (and yield) from dividend plays has proven quite worthwhile, at least for the most part, with the broader S&P 500 now just shy of its all-time highs. With inflation back under control, thanks to Fed chairman Jay Powell, and rates (and yields) headed lower while share prices on dividend plays head higher, retirees have a tough decision on their hands.

Should one take profits on their “risky” dividend-paying equities before the next market correction can happen?

By doing so, one can book a likely gain and trim a bit of risk as market valuations become less attractive. That’d only be prudent, right?

Additionally, some big-name investing legends — Warren Buffett included — have been selling quite a bit of stock in recent quarters. In any case, trading stocks can make sense, provided you know where to park it.

Key Points About This Article

• Retirees shouldn’t give up on dividend stocks just because some of them have had a good run, especially if the fundamentals are improving.
• AT&T stock stands out as a dirt-cheap dividend stock worth watching closely as device upgrade season looks to heat up.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Retirement Income 101: Find the Perfect Balance of Dividend Stocks and Risk-Free Assets

With rates on risk-free assets (bonds and certificates of deposit) now lower than they were at this time last year, staying aboard your favorite dividend payers on the way up may seem justifiable, even if Buffett and other big names trim away at their portfolios, either due to extended valuations or something else.

Though this piece won’t give you a definitive answer (I suggest you reach a financial adviser to tailor a plan for you) on whether it’s time to de-risk, I do think that there are great “middle ground” options for investors who want a less risky, though not risk-free, way to ride the markets higher while getting paid fat dividends over time.

Undoubtedly, a fatter passive income supplement and appreciation potential are always nice to have, provided it fits with your risk tolerance and investment objectives. As you strive to find the right balance between risk-free and risky investments, perhaps it’s time to have a look at some less-volatile dividend payers while they’re looking cheap.

AT&T

Shares of long-time underperforming telecom firm AT&T (NYSE:T) have surprisingly been a major winner this year, with shares returning around 25% year to date and more than 43% in the past year. Undoubtedly, AT&T will benefit from lower interest rates in the future, but after going parabolic in the past month, questions linger as to just how much optimism is baked in.

As the company continues bringing on new subscribers while looking to meet demand for the new AI-ready Apple (NASDAQ:AAPL) iPhone 16 smartphone, perhaps T stock has the catalysts in place to continue its hot run.

Recently, Citigroup (NYSE:C) analyst Michael Rollins upped his price target to $24.00 from $21.00 per share.

Why the optimism amid newfound momentum?

Rollins likes what he’s hearing from management regarding the wireless landscape. With strong quarters of subscriber additions to build off, I certainly wouldn’t be surprised if the hard-hit telecoms have more room to run as they look to claw back some of the losses endured in recent years.

Though iPhone 16 demand may have some investors parting with their AAPL shares this September, I think those with a longer-term horizon should consider the potential for a multi-year AI-driven upgrade cycle. Further, let’s not forget that the iPhone isn’t the only AI phone that’ll be hitting the markets in the coming years.

Whether it’s iOS or Android that has the best AI features, AT&T will be ready to position itself for a substantial uptick in upgrades. The Next Up Anytime program, which allows upgrading more frequently, may also gain traction as consumers may be inclined to stay with the latest and greatest hardware to power personalized AI features.

Bottom Line

With a 5.2% dividend yield, upgrade catalysts in place, and a mere 12.4 times trailing price-to-earnings (P/E) multiple, T stock seems like a bargain that retired income investors may wish to watch in October.

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