Assets Under Management AUM

Want $1,000 in monthly dividend income? This ultra-high yielding stock duo can make it happen

A successful retirement depends on a person having enough income to cover expenses.

And since Social Security retirement benefits only replace about 40 percent of a worker’s average pre-retirement income, most will need to self-fund at least part of their retirement. One of the most common ways to achieve this is through dividend income.

Here are two ultra-high-yielding dividend stocks with secure payouts that could help bridge the gap between Social Security income and retiree living expenses.

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1. T. Rowe Award

As of July 31, T price. Rowe (TROW -0.28%) was one of the largest fund managers in the world, with $1.39 trillion in assets under management (AUM). Due to the downturn in financial markets, this is a significant drop from the company’s maximum assets under management figure of $1.69 trillion at the end of last year. However, it remains significantly higher than the figure of $903.6 billion in assets under management in the second quarter of 2017.

T. Rowe Price’s investment advisory fees accounted for 93.6% of its total net income in the first half of 2022. And because these fees are tied to its assets under management, the firm’s total net income fell 10% year-over-year to reach $3.4 billion for the first half of the year. T. Rowe Price’s non-GAAP (adjusted) diluted non-GAAP (adjusted) earnings per share (EPS) for the first half fell further — down 41.5% from the year-ago period to $3.88.

These results explain why T. Rowe Price shares have plunged 34% since the start of the year, pushing the dividend yield to 3.8%. For context, that’s more than double the 1.5% return of the S&P 500 index. Still, the company’s dividend looks pretty reliable for two reasons.

On the one hand, analysts believe that the economy will grow in the medium term. This will likely drive up stock prices. And it will also lift T. Rowe Price’s revenue and adjusted diluted EPS by 12.6% annually over the next five years. Second, the company’s projected dividend payout ratio of 51.4% for this year is manageable.

T. Rowe Price’s assessment seals the deal to make this a smart buy for investors looking for sustainable income. At the recent stock price of $129, T. Rowe Price’s forward price-to-earnings (P/E) ratio is around 15. That’s close to the management industry average of 14.1. of assets. Investing $143,000 in T. Rowe Price would buy 1,109 shares, generating $1,330 in quarterly dividend income. But since dividend investing is a strategy that can go up or down, you can invest everything you have and start creating a passive income stream.

2. Prudential Financial

With $1.41 trillion in assets under management as of June 30, Prudential Financial (PRU 1.32%) is another great asset manager. This AUM figure is significantly lower than the high of $1.74 trillion at the end of 2021, although it is still slightly higher than the $1.33 trillion from five years ago.

But unlike T. Rowe Price, Prudential also offers life and disability insurance to its clients. With families’ increasing financial obligations, life and disability insurance are expected to remain in high demand. Along with the expectation that stock markets will rise over time, this should lead to higher earnings for the company.

Prudential also offers income investors a huge and secure dividend yield of 4.9%. Indeed, the company’s dividend payout ratio is expected to be 47.2% in 2022. This leaves plenty of room to cover the dividend and continue to increase it each year.

Even better, Prudential is trading at a forward P/E ratio of 9.4. This figure is slightly lower than the life insurance industry’s average price-to-earnings ratio of 11.5, suggesting the stock is a bargain. And investors with $143,000 set aside could buy 1,388 shares, which would produce $1,666 in quarterly dividend income.

Kody Kester holds positions at Prudential Financial and T. Rowe Price Group. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.