Many people believe that dividend paying stocks are the best way to create reliable income in retirement. The idea sounds great—own shares of strong companies, collect dividend payments, and never worry about running out of money.
But does it really work that way?
A dividend is never guaranteed. Companies can reduce or eliminate dividends at any time, often due to factors outside your control. If you’re relying on dividends for retirement income, you need to understand the risks.
Let’s take a closer look at some real-world examples of companies that were once seen as “safe” but ended up failing their investors.
The Case for Dividend Paying Stocks
Now, don’t get me wrong—I’m not against stocks at all. In fact, if you’re going to own stocks, dividend paying stocks are a smart choice because of the power of compounding. Albert Einstein called compounding the eighth wonder of the world, and he wasn’t wrong.
With dividend paying stocks, you can:
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- Reinvest dividends to grow your portfolio over time
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- Benefit from increasing payouts if the company raises dividends
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- Avoid relying solely on stock price growth to build wealth
But when it comes to reliable income in retirement, there’s a problem—dividends are never guaranteed.
Companies can cut, or even eliminate, dividends at any time, and if you’re depending on that income to pay your bills, you could be in for a rude awakening.
Why Reliability of Income Matters in Retirement
When you’re retired, ROI doesn’t just mean Return On Investment—it means Reliability Of Income.
No matter how good a stock’s dividend history looks, nothing beats the reliability of an income annuity. With a guaranteed income annuity, you get:
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- Fixed, predictable payments for life
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- No market risk—income doesn’t change based on market or economic performance
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- Protection against dividend cuts and stock crashes
Dividend stocks, on the other hand, come with serious risks. Here’s how some companies that were once seen as safe for dividend income collapsed—and why.
Lessons from Dividend Stock Failures
While each company’s struggles were unique, the same patterns appeared over and over.
What Went Wrong?
| Company | Key Mistake | How It Hurt Investors |
| Kodak | Ignored industry shifts | Lost revenue, dividends eliminated, bankruptcy |
| RadioShack | High dividend yield masked trouble | Dividend suspended, stock price collapse |
| JCPenney | Reacted too late to online retail | Dividend cut multiple times, bankruptcy |
| General Motors | Debt and pension obligations crushed profits | Stock wiped out and only survived due to taxpayers giving them a bailout |
Now, let’s look at what actually happened in each case.
Kodak: A Cautionary Tale of Industry Disruption
Kodak was once a dominant force in the photography industry. Founded in 1888, the company became a household name, pioneering film photography and making cameras accessible to the general public.
Kodak even invented the digital camera in 1975, but instead of embracing the new technology, they focused on film, believing digital photography would never replace it.
That was a mistake. As digital photography took over, Kodak’s revenue plummeted. The company cut dividends, and then eliminated them entirely before eventually declaring bankruptcy.
Kodak’s Dividend and Stock Collapse
| Year | Dividend Per Share | Notes |
| 1988 | $0.50 | Peak dividend payout, company thriving |
| 1994 | $0.40 | First sign of trouble—dividend cut begins |
| 2003 | $0.44 | Holding steady, but the company struggles |
| 2009 | $0.00 | Dividend eliminated due to financial losses |
| 2012 | Bankruptcy declared | Shareholders lost value |
RadioShack: The Dividend Yield Trap
RadioShack was once a leading electronics retailer, paying consistent dividends for years. However, by the early 2000s, it struggled to compete with larger retailers and online stores.
By 2012, the stock price had collapsed, making the dividend yield look artificially high—a classic trap that lures in income-seeking investors. But instead of being a great investment, the company was in deep trouble.
RadioShack’s Dividend and Stock Collapse
| Year | Dividend Per Share | Notes |
| 1987 | $0.03 | First quarterly dividend paid |
| Early 2000s | Varies | Stock price declines as competition grows |
| 2012 | High dividend yield | Looked attractive but was a red flag |
| Late 2012 | Dividend suspended | Stock price continued to fall |
| 2015 | Bankruptcy declared | Shareholders lost value |
JCPenney: The Retailer That Waited Too Long to Adapt
JCPenney was a staple of American retail for decades, paying dividends consistently and increasing payouts for years. But when online shopping took off, the company was slow to respond.
As sales declined and debt piled up, JCPenney cut dividends multiple times before eventually suspending them completely.
JCPenney’s Dividend and Stock Collapse
| Year | Dividend Per Share | Notes |
| 1987 | First dividend issued | JCPenney establishes itself as a dividend stock |
| 2000 | $0.54 → $0.28 | 50% dividend cut as financial struggles begin |
| Late 2000 | $0.28 → $0.12 | Another 50% cut just months later |
| 2012 | Dividend suspended | No more payouts for investors |
| 2020 | Bankruptcy declared | Shareholders lost value |
General Motors: When Dividend Cuts Signal a Bigger Problem
GM was once the largest and most powerful automaker in the world, paying reliable dividends for decades. But competition from foreign automakers, rising labor costs, and a decline in consumer demand put serious pressure on GM’s finances.
Investors who focused on GM’s high dividend yield ignored the warning signs. The company slashed dividends in 2006, and by 2009, GM filed for bankruptcy.
General Motors’ Dividend and Stock Collapse
| Year | Dividend Per Share | Notes |
| 1997-2005 | $0.50 (quarterly) | GM pays a consistent, reliable dividend |
| 2006 | $0.50 → $0.25 | Dividend cut in half as financial struggles begin |
| 2008 | $0.25 (final payment) | Last dividend paid before suspension |
| 2009 | Bankruptcy declared | Stock goes to zero, dividend eliminated |
Why Guaranteed Income Annuities Offer More Stability
With all these examples, one thing is clear: dividends are not guaranteed. Even strong companies can cut or eliminate them, leaving retirees without income.
With a guaranteed income annuity, you get:
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- A fixed paycheck for life
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- No fear of dividend cuts
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- Protection from market crashes
The Purpose of Your Money Determines the Best Strategy
When planning for retirement, ask yourself: what is the purpose of my money?
| Purpose | Best Financial Tool |
| Growing net worth | Stocks, Real Estate, Mutual Funds, etc. |
| Leaving a legacy | Life Insurance |
| Generating income in retirement | Income Annuity |
If you need reliable income, an income annuity is the only option that guarantees your paycheck won’t stop—no matter what happens in the market.
Next Steps: Learn More About Income Annuities
If you’re new to annuities and want to learn how they can give you 20 percent more spendable income in retirement, check out my video series linked below.
And if you’d like to see how my ATLAS Annuity Strategy could work for your retirement, book a short call using my calendar.
Dividend-paying stocks can be a great investment, but if you’re relying on them for income in retirement, they come with serious risks. Don’t let your income disappear when you need it most. An annuity ensures you always have a paycheck, no matter what happens in the stock market.
Podcast Episode #62: Guaranteed Income Annuities vs Dividend Paying Stocks
Download Episode #62: Income Annuities vs Dividend Paying Stocks on Apple Podcast