Where to find higher yields
Many well-known companies are paying dividends of 3% to 5%, and more members of the S&P 500 are paying dividends than at any point since 1999.
Dividends are the income-generating potential of a company, much like the interest you earn from a certificate of deposit. They're paid quarterly, so if the stock pays an annual dividend of $2, you'll receive four payments per year of 50 cents for each share you own.
Some top dividend-paying companies include Exxon Mobil, Proctor & Gamble, Verizon and Caterpillar.
One way to minimize risk is to consider a high-dividend ETF that invests in dozens of dividend-paying companies.
SPDR S&P Dividend ETF (SDY) currently yields 2.21% and has an expense ratio of 0.35%. There's also the First Trust DJ Global Select Dividend Index Fund (FGD), which tracks an index of 100 global mid-cap and large-cap dividend-paying stocks. It currently yields 4.46% and carries an expense ratio of 0.6%.