Social Security checks rarely stretch as far as retirees hope.
Even with a solid cost-of-living adjustment on the way for 2027, Medicare premiums and inflation tend to eat into the raise before it ever reaches a bank account.
That is why many financial firms point retirees toward dividend stocks as a way to build a second income stream.
Charles Schwab put it plainly in its investor education materials, noting that for retirees, regular payouts from dividend stocks can provide a recurring and steady stream of income.
Two companies stand out right now for income-focused investors: grocery giant Albertsons and pipeline operator Plains All American.
Both pay quarterly dividends, and both gave investors fresh updates on their payouts during recent earnings calls.
Social security benefits may not be enough
How much someone collects from Social Security depends heavily on the age they claim benefits.
According to Social Security Administration data, the average monthly benefit ranges from $1,424 at age 62 up to $2,275 at age 70.
That is a difference of more than $850 a month, or over $10,000 a year, based on the starting age.
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Retirees who claim Social Security earlier may need extra cash later for medical bills, home repairs, and travel.
An additional passive income source can close this gap, making investing in dividend stocks a top strategy for retirees.
A retiree who owns shares that pay quarterly cash dividends can supplement whatever Social Security check they receive each month, without needing to sell shares or tap into their savings.
Albertsons has grown its dividend
Albertsons (ACI) operates more than 2,200 stores under names like Safeway, Vons and Jewel Osco.
The company has raised its dividend from an annualized $0.40 per share at its 2020 IPO to $0.68 per share today, a 10% annual growth rate since going public.
That puts the stock’s dividend yield around 5.5%, based on recent trading levels near $12.4 a share.
On its July 23 earnings call:
- CEO Susan Morris outlined a restructuring plan called the ACI Edge, which moves the company from 11 divisions to four regions and centralizes buying decisions.
- Management expects the plan to generate about $200 million in incremental annual savings, with most of the benefit landing in fiscal 2027.
- Albertsons also returned more than $300 million to shareholders in the first quarter, including $84 million in dividends and $225 million in share buybacks.
CFO Sharon McCollam, who announced her retirement on the call, said the company ended the quarter with a net debt-to-adjusted-EBITDA ratio of 2.3 times, which she described as giving the business ample financial flexibility.
Related: Longtime grocery chain exits entire market after 49 years
The company trimmed its full-year outlook, citing softer grocery unit trends and pressure from lower-income shoppers.
Adjusted earnings per share are now expected between $1.75 and $1.85 for fiscal 2026, down from earlier targets.
Sharon McCollam stated:
“Our more cautious view reflects ongoing pressure on lower-income consumers, softness in grocery industry unit trends and the potential for additional affordability pressure from supplier cost increases.”
Plains All American offers a high-yield dividend
Plains All American (PAA) runs one of the largest crude oil pipeline networks in North America, with a heavy footprint in the Permian Basin.
Its quarterly distribution recently rose to $0.4175 per unit, or $1.67 annualized, putting the yield near 6.8% at current prices around $24. The annual dividend has more than doubled from $0.72 per share in 2021.
CEO Willie Chiang told investors on the August 7 call that the company is on track to hit its full-year adjusted EBITDA guidance of $2.88 billion, plus or minus $75 million.
Plains also closed the sale of its Canadian NGL business in May, which helped bring leverage down to 3.3 times.
The company raised its 2026 growth spending to a range of $400 million to $450 million, funding projects like an expanded Permian gathering system and a capacity boost to its Cactus III pipeline.
Management expects roughly $1.75 billion in free cash flow this year and plans to keep growing the distribution by $0.15 per unit annually.
Chiang also pointed to record crude exports out of the Gulf Coast during the quarter, along with rising Permian production forecasts, as reasons for optimism heading into 2027.
What to know before you invest in dividend stocks
Neither stock is risk free.
Albertsons faces a softer grocery unit environment and rising competition from Walmart and Amazon, and it is still absorbing pressure from the Inflation Reduction Act’s impact on pharmacy sales.
Plains All American carries commodity price exposure tied to oil markets, which can swing sharply based on global events.
Moreover, dividend payouts are not guaranteed and could be rolled back or suspended if financials take a nosedive.
Notably, PAA was forced to lower its annual dividend from $2.80 per share in 2016 to $1.20 in 2019 and $0.72 in 2020.
Still, both companies have shown a clear commitment to paying and raising cash to shareholders, even while investing in their businesses.
A 6% yield on a $100,000 investment can help you generate $6,000 in annual dividends, which translates to $500 each month or $1,500 per quarter.
For a retiree trying to close the gap between a Social Security check and monthly expenses, that combination of income and growth potential is worth a closer look.
As always, dividend income should complement a diversified retirement plan rather than replace it, and anyone considering these stocks should weigh their own risk tolerance and consult a financial advisor before investing.
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