S&P 500 dividend yield hits record low near 1% and it has some retirees rethinking their strategies

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Retirees have long depended on dividend stocks for a reason: The payouts show up whether or not you sell a single share.

Unfortunately, that plan is now getting harder to pull off because the S&P 500's dividend yield has been running just above 1%, the lowest reading on record, according to Charlie Bilello, chief market strategist at Creative Planning (1).

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The payouts themselves haven't shrunk, but yield is dividends measured against price and prices have climbed far faster than payouts. The index crossed 7,700 for the first time in early August and because it weighs companies by market value, it now leans heavily on megacap tech names that pay little or nothing (2).

Steven Yedlin, a 75-year-old retired doctor in East Grand Rapids, Mich., has witnessed this firsthand. He told the Wall Street Journal (WSJ) that he built his portfolio around dividend ETFs and by the time he stopped working, his taxable account was split evenly between dividend funds and S&P 500 index funds (3).