Dividend Stocks or Treasury Bills? The Retirement Income Math Might Surprise You

Treasury bills paid average yields from 3.98% on the 4-week bill to 4.44% on the 52-week bill as of October 9, 2026, the latest Treasury record available. On that date the 13-week bill averaged 4.15% and the 26-week bill averaged 4.31%. That is what you can earn without owning a stock. A dividend payer has to beat it, and it has to keep paying while it does.

What a Treasury Bill Is and When Its Rate Changes

The U.S. government issues Treasury bills as short-term loans. The purchase price is below face value, and the full face value returns at maturity. Your interest is the difference between those two amounts. Under IRS guidance, bills generally come in 4-, 8-, 13-, 26-, or 52-week maturities, are issued in the amount of $100 and multiples of $100, and the Treasury also sells 6-week and 17-week bills, which show up in the October 9, 2026 rate table. They can be purchased at auction through TreasuryDirect or through a brokerage account.

Auction bidding sets the discount. Once you buy a specific bill, its rate is locked until that bill matures. Your next bill has a floating rate. At maturity, your principal comes back and you must buy a new bill at whatever the market pays that week. Rates can move even over a few days: the 4-week average yield was 3.95% on October 7, 2026 and 3.98% on October 9. Over the same period, the 52-week average slipped from 4.46% on October 6 to 4.44%.

The result is reinvestment risk, and it is the main weakness of T-bills for a retiree. If rates fall, every bill you roll over pays less, and your income drops with them. Bills also has price risk on the secondary market before maturity. Its market value can sit below what you paid plus the interest earned so far.

The government’s guarantee covers default only. You are not protected from inflation, falling rates at rollover, or a lower sale price if you exit early. T-bills have no FDIC coverage. FDIC insurance applies to bank deposits such as CDs, and it is capped at $250,000 per depositor, per insured bank, per ownership category.

Dividend Safety Decides Whether a Higher Yield Is Worth It

Once you buy a T-bill, the government cannot reduce what that bill pays, but the bill’s payout can never rise either. A dividend can be cut at any board meeting. It can also be raised, and a growing payout is the one thing a fixed-rate bill cannot give you. The six NASDAQ-listed payers below show both results. Each is an example of the dividend side of the comparison, and the trailing yields are taken from data as of October 13, 2026.

Dividend Growers Yield Less Than T-Bills but Keep Raising

WD-40 yields well below every T-bill tenor, but its quarterly payout has climbed from $0.42 in 2016 to $1.02 now, with the next payment due October 30, 2026. Fiscal third-quarter revenue rose 24.4% to $195.12M, and adjusted EPS of $2.33 exceeded the $1.56 consensus. McGrath RentCorp has paid quarterly since 1999, and the payment generally rose over that record. Its Q2 2026 EPS of $1.37 missed the $1.46 estimate. The weakness came from operations, and trailing EPS of $6.21 sits far above the $1.96 paid out over 12 months.

Apogee Enterprises has lifted its payout every year since 2017 and raised fiscal 2027 adjusted EPS guidance to $3.00 to $3.40, which covers a $1.08 forward annual dividend with room to spare. First United, a Maryland community bank, just raised its quarterly dividend to $0.28, payable November 2, 2026, as its net interest margin widened to 3.98%. Its history is also a warning: the payout fell to $0.01 per quarter in 2010, after $0.20 payments in 2009. Bank dividends can disappear in a credit cycle.

High Yielders Are Where Dividend Cuts Happen

Seven Hills Realty Trust has the highest trailing yield on this list, and it is the clearest case of a big yield signaling risk. It cut its quarterly distribution from $0.35 to $0.28 starting with the July 21, 2025 ex-date. Q2 2026 distributable earnings of $0.23 per share still fell short of the payout, a 122% payout ratio. Management says it is on plan to cover the dividend by year end.

The shares are down 20.64% over one year. Part of that headline yield comes from the falling price, and a retiree taking in it has lost principal along the way. The warning signs here show up again and again in double-digit yielders, and we listed all seven of them in a free dividend trap guide.

RMR Group has held its quarterly dividend at $0.45 since April 2024. Trailing diluted EPS of $1.15, however, is below the $1.80 annual payout, and fee-generating assets under management reduce to $37.14B from $39.84B. Incentive fees on pace for about $33M in calendar 2026 could help close that gap. Until they show up, the coverage question remains open.

Both high yielders pay more than any T-bill tenor on paper, and both have weaker payout coverage than the growers. A T-bill’s discount cannot be cut after you buy. It also never increases the way WD-40’s payout has.

Taxes Often Decide Which Pays More

Per IRS Publication 550, interest from Treasury bills is subject to federal income tax but is exempt from all state and local income taxes. It counts as ordinary income on your federal return, and you generally report it when the bill matures, on Form 1099-INT. For a retiree in a high-tax state, the state exemption can add significantly to what a bill clears after tax. In a state with no income tax, the exemption adds nothing.

Dividends work the other way. Qualified dividend income from domestic corporations is taxed at the lower preferential rates under 26 U.S.C. § 1(h)(11), as long as you meet the minimum holding period around the ex-dividend date. Most regular payouts from companies like WD-40, McGrath, Apogee and First United can qualify. States generally tax dividends as ordinary income, though.

REIT payouts are different. Under 26 U.S.C. § 857(c)(2), only the portion a REIT designates counts as qualified dividend income, so much of a mortgage REIT distribution like Seven Hills’ is typically taxed at ordinary federal rates. The code separately sets a “qualified REIT dividend” under 26 U.S.C. § 199A(e)(3), which can soften that for eligible holders. A growth stock paying qualified dividends often keeps more after federal tax, while a T-bill keeps more after state tax.

Who Each Option Suits

Retirees who need their principal intact and a known amount of cash on a set date, who live in a state with income tax, and who can accept income that resets every time a bill matures may find T-bills suitable. Well-covered dividend growers such as WD-40, McGrath, Apogee and First United suit retirees who need income that rises over a long retirement and can handle stock price swings and even the chance of a cut. High-yield payers with thin coverage, such as Seven Hills and RMR, require tracking payout ratios every quarter and has a higher chance of a reduced dividend.

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