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Retirement investing has changed significantly since the start of 2000 as revealed by the largely sideways trading of the Dow Jones Industrials. Since 2000 the Dow has struggled to reach new record levels, held back by two unusually difficult bear markets. Traditionally, capital appreciation has contributed 2/3 of investment gains and dividends provided the balance. Limited market performance with substantially higher volatility has redefined past standards for growing retirement accounts.

Dow Jones Industrials - 40 years

(click to enlarge)

Source: the-privateer.com

At the same time, people are living longer and need more income to pay for inflated and added retirement costs. Higher nursing, medical and related costs, especially in the later years when costs can skyrocket, must be paid for.

An excellent source for higher income is MLPs. The MLP index yields 6.5%, very attractive in a low yield environment that will continue for at least two years. Three of the largest MLPs deserve special attention for providing high yields and offering comparable corporations for investment. MLPs have provided growth and high yields. The Alerian MLP index has quadrupled over 17 years and the comparable index which includes reinvested income has increased more than 12 fold.

Enbridge Energy Partners (EEP and EEQ), Kinder Morgan Energy Partners (KMP and KMR) Linn Energy (LINE and LNCO) are three of the largest MLPs with excellent records of growth. EEP is best known for owning the US portion of the world's longest oil pipeline that runs from Canada to Oklahoma and on to eastern Canada. KMP has become the largest MLP with energy operations across the US and into Canada. LINN is a top-10 oil and natural gas MLP that focuses on the development and acquisition of long-life properties to complement its assets.

In addition to their records of accomplishment, each has a companion corporation for the MLP units (which bring tax hassle in taxable and non-taxed accounts). EEQ and KMR pay stock dividends based on the distributions paid to the units. LNCO had an IPO two months ago and pays dividends (with money) that are taxable. Management has guided that up to 60% of the Q4 2012 dividend will be taxed as a qualified dividend and the balance will be nontaxable.

MLP

Price

Yield

Ownership

Enbridge Energy Partners (NYSE:EEP)

$28.26

7.7%

Units

Enbridge Energy Mgmt (NYSE:EEQ)

$29.11

7.5%

shares

Kinder Morgan Partners (NYSE:KMP)

$79.26

6.4%

Units

Kinder Morgan Mgmt (NYSE:KMR)

$75.02

6.7%

shares

Linn Energy (NASDAQ:LINE)

$36.78

7.9%

Units

Linn Co (NASDAQ:LNCO)

$36.90

7.7%

shares

Real Estate Investment Trusts, REITs, have performed extremely well during in recent years. After a severe plunge during the last recession, the Dow Jones REIT index has recovered and is up more than 67% in the last 10 years. Like MLPs, they are generally thought of as yield securities. High yields from REITs are still available and a portion of dividends (generally) are not taxable in taxable accounts. Four of the best are shown below along with the taxable portion in 2012:

REITs

Price

Yield

Taxable

Omega Healthcare Investors (NYSE:OHI)

$23.60

7.5%

63.8%

Senior Housing Properties (NYSE:SNH)

$23.56

6.6%

65.6%

EPR Inc (NYSE:EPR)

$46.61

6.4%

72.5%

Sun Communities (NYSE:SUI)

$40.00

6.3%

23.5%

Growing dividends with high yields have been critical for portfolio growth in recent years when capital appreciation has been limited and uneven. Below are 8 of the best Dividend Aristocrats (raised annual dividends for at least the last 25 years) with growing stock prices. Stock price growth generally beat the Dow Jones Industrials while dividends were raised. Yields are above 3% and P/Es are reasonable, around 15X. S&P just updated its list of Dividend Aristocrats and no changes were made to last year's list.

Price

Yield

HCP (NYSE:HCP)

$45.00

4.4%

Leggett & Platt (NYSE:LEG)

$27.49

4.2%

Kimberly-Clark (NYSE:KMB)

$84.95

3.5%

McDonald's (NYSE:MCD)

$90.04

3.4%

Johnson & Johnson (NYSE:JNJ)

$70.75

3.4%

Clorox (NYSE:CLX)

$75.38

3.4%

Procter & Gamble (NYSE:PG)

$69.82

3.2%

Emerson Electric (NYSE:EMR)

$53.25

3.0%

Dividends are the best friends for retirement accounts, especially from Dividend Aristocrats that have impressive records of raising dividends and stock price growth. Investors upgrading yields bid these stock prices up in 2012, lowering their yields. But they still offer attractive yields when so many yields are next to nothing.

Financial security is a key requirement in retirement investing. Capital appreciation cannot be relied on as in the past. Growing income has greater importance so that retirees can afford a better quality of life and the finest medical care when needed in later years. Currently the fiscal cliff dominates investment thinking. Prospects are that even if there is a last minute compromise, the new year will start with a difficult beginning. However, these securities can deliver rewards for patient investors searching for attractive and reliable returns with growing streams of dividends.

Source: Retirement Investing For Patient Investors In Search Of High Returns