NEW YORK (TheStreet) -- For many investors, the main appeal of an annuity, a contract with an insurance company, is that it provides a fixed stream of income for a set period of time.
Far more attractive, however, are dividend aristocrat stocks such as HCP (HCP), AT&T (T), and Consolidated Edison (ED) that have increased the dividend payment to shareholders annually for at least the past 25 years.
An annuity is similar to a bond in this regard in that anything either can do, a dividend aristocrat stock can do much, much better for an investor.
Annuities are typically used in retirement planning.
Depending on the rating of the insurance company selling the annuity, it can provide a reliable stream of income for the length of the contract. The rates offered depend on variety of factors, ranging from the quality of the issuer to the prevailing economic conditions. As an example, the present rate for the Athene Benefit Ten Fixed Index Annuity is 1.70%.
By contrast, the dividend yield for HCP, a real estate investment trust for healthcare facilities, is 5.87%. For AT&T, the communications giant, it is 5.22%. Consolidated Edison, a utility serving New York, pays its shareholders a dividend at a rate of 4.48%.
Here is where dividend aristocrat stocks are far superior to annuities, and to bonds.
Each of those stocks has a history of increasing the dividend. That rarely happens with an annuity. It has happened annually for at least the past quarter-century with HCP, AT&T, Consolidated Edison and every other member of the dividend aristocrat group.