The retirement saver's dilemma invest for growth or income is a tricky challenge because it seems to be a choice between cash in hand today and riches tomorrow. But it's a choice that can be easily sidestepped, experts say, with a well-diversified portfolio of stocks that pay handsome dividends and also deliver growth. The list of healthy dividend growers has changed in recent years as the financial crisis has forced many banks and insurers to leave the club. But some star payers remain, including restaurateur McDonald's and oil titan Chevron, both currently paying yields in excess of 3%. Moreover, there are new joiners to the dividend elite. "Some of the biggest technology companies have recently started paying dividends," says Kevin Grimes, a principal at the financial advisory Grimes & Co. "Microsoft, IBM and Intel have been paying dividends, and Cisco and Oracle are now doing it." No slouches here. Microsoft just raised its dividend 23%.
Of course, it's not just dividends you want but dividend growth. A study last year by Ned Davis Research shows that from 1972 to 1999, stocks of companies that either started paying dividends or increased their dividends outperformed the stock market by a healthy margin. If picking stocks is not how you want to spend your retirement, there are a bevy of mutual funds that specialize in dividend growth, including Blackrock Equity Dividend (MBDVX) and T. Rowe Price Dividend Growth (PRDGX), both highly rated by Morningstar. There are also dedicated ETFs, including the Vanguard Dividend Appreciation (VIG).