T-Bills Yield Up to 4.45%. Why Would Retirees Choose Dividend Stocks?

As of October 23, 2026, Treasury bills paid average yields of 4% on the 4-week bill, 4.17% on the 13-week, 4.35% on the 26-week, and 4.45% on the 52-week. Every one of those rates is higher than the published dividend yields on three of the long-tenured income stocks in this comparison. Even so, a higher starting yield says only part of the story for a retiree who needs income for the next 20 years.

How a Treasury Bill Pays, and Why Your Rate Resets at Every Rollover

A Treasury bill is a short-term loan to the U.S. government. The Treasury sells bills at a discount or at par (face value), and when the bill matures, you receive the full face value. The difference between what you pay and what you get back is your interest. TreasuryDirect explains that for bills, “interest” is the difference between what you paid and the face value you get when the bill matures. Bills pay nothing along the way. You collect everything when the bill matures.

Bills come in 4-, 6-, 8-, 13-, 17-, 26-, and 52-week terms, with a $100 minimum purchase. The 4-week through 26-week bills auction weekly, and the 52-week bill auctions every four weeks. Your rate is fixed at auction and stays fixed only until the bill matures. When it does, you get your principal back and have to buy a new bill at whatever rate the next auction sets. That is reinvestment risk, and for retirees who live on rolling bills, it is the main risk they carry.

Rates have already moved in both directions within a year. The Federal Reserve’s target range tops out at 4.00% as of October 25, 2026. It was 4.25% a year earlier, fell to 3.75% from December 10, 2025 through September 15, 2026, and returned to 4% on September 16, 2026. Bill yields move with it.

The 52-week yield was 4.49% on October 14 and 4.45% on October 23. Someone rolling 4-week bills will get a new rate about a dozen times a year. Someone holding a 52-week bill locks in one rate for the year and carries all the rollover risk at a single date.

Government backing has limits that retirees should understand. The full faith and credit of the United States backs payment at face value at maturity. It does not protect the market price if you sell it before it matures. If rates rise after you buy, you can sell early for less than you paid. That price risk is small on a 4-week bill and increases with longer maturities.

Treasury notes, the longer-dated version, pay a fixed coupon for years and swing more in price. Treasuries are also securities, so FDIC deposit insurance doesn’t apply. And government backing does nothing for buying power. Consumer prices rose 0.6% from August in the September 2026 CPI reading. The Bureau of Labor Statistics’ research index for Americans 62 and older rose 0.5% over the same month.

Dividend Safety Comes First: Six Income Stocks Measured Against Bills

The comparison group is six long-tenured U.S. dividend payers: Johnson & Johnson (NYSE:JNJ | JNJ Price Prediction), Procter & Gamble (NYSE:PG), Coca-Cola (NYSE:KO), Exxon Mobil (NYSE:XOM), Verizon Communications (NYSE:VZ) and McDonald’s. A dividend yield is the annual payout divided by the share price. It shows you the income rate at today’s price. It leaves out share-price changes, which can be far larger than the dividend in any given year.

On starting income alone, bills come out ahead of the three stocks with published yields. As of October 23, 2026, Coca-Cola, Exxon, and McDonald’s all yield less than the 4-week bill’s 4%. Verizon, Johnson & Johnson, and Procter & Gamble did not have a current published yield figure.

Half One: A Dividend Can Be Cut, and the Face Value of a Bill Cannot

A dividend is a board decision made quarterly. No contract guarantees it, so the first question for any income stock is whether the business can keep paying.

• Verizon shows why leverage needs the closest look. Free cash flow reached $6.43B in Q2 2026, up 27.1% from the prior year. The company also carries $136.5B of unsecured debt, and net debt to adjusted EBITDA rose to 2.5x from 2.2x at the end of 2025. Cash flow is rising, but leverage is rising too.
• Exxon Mobil depends on oil and gas prices. In Q1 2026, it booked $706M in losses from Middle East supply disruption. The record shows how it performs under pressure: the quarterly payout stayed at $0.87 through all of 2020. Exxon held the dividend that year. It has reached $15.6B in cumulative structural cost savings since 2019.
• McDonald’s faces slower traffic. Global comparable sales increased only 1.3% in Q2 2026, down from 3.8% a year earlier. The board still raised the quarterly dividend to $1.93 from $1.86, declared on September 17, 2026.
• Procter & Gamble plans to pay over $10 billion in dividends in fiscal 2027. Its chief executive cited “solid sales, earnings and cash results” in the Q1 report. The pressure points are an estimated ~$1.4B after-tax commodity cost increase and a 150 bps drop in core gross margin.
• Johnson & Johnson reported Q2 revenue of $25.31B, up 6.6%, even as STELARA sales fell 55.2% to biosimilar competition. Coca-Cola expanded its operating margin to 34.9% from 34.1% on 5% global unit case volume growth.

The other half of that risk is principal. A bill held to maturity pays back face value. A stock pays back whatever the market offers on the day you sell. McDonald’s shares are down 17.11% through October 23, even as its dividend rose.

Half Two: A Dividend Can Grow, and a Bill’s Rate Cannot

A bill’s discount is set at auction and never changes. Bill income rises only if a later auction pays more, and nothing guarantees that. Dividends from all six companies grew over the past year:

• Johnson & Johnson: $1.30 to $1.34 quarterly
• Procter & Gamble: $1.0568 to $1.0885
• Coca-Cola: $0.51 to $0.53
• Exxon Mobil: $0.99 to $1.03
• Verizon: $0.69 to $0.7075
• McDonald’s: $1.86 to $1.93

The long-term record matters more. Coca-Cola paid $0.16 per share in 1999, and Johnson & Johnson paid $0.46 per share in early 2009. A retiree who started with those payouts has watched the income rise year after year, without ever selling a share to fund it (a free guide here shows how to build that kind of income ladder). A retiree who rolled bills over during the same period accepted a new rate at every rollover.

Taxes Can Flip the Answer: State Exemption Versus Preferential Federal Rates

Start with Treasury bills. According to the IRS, interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. The IRS taxes that interest at ordinary federal rates, the same as wages or IRA withdrawals. It appears on Form 1099-INT (box 3). The state exemption matters most to retirees in heavily taxed states such as California and New York. It is worth nothing to a retiree in Texas, which has no personal income tax.

Qualified dividends get different treatment. Under 26 U.S.C. § 1(h)(11), qualified dividend income from domestic corporations is added to net capital gain. So it is taxed at the lower long-term capital gains rates instead of ordinary rates. All six companies here are U.S. corporations. The lower rate comes with a holding-period test. Under 26 U.S.C. § 1(h)(11)(B)(iii)(I), the shares must meet the section 246(c) requirement with “60 days” measured within a “121-day period”. States with an income tax generally tax dividends like other income.

The practical result: a retiree in a high bracket living in a no-income-tax state gets the most from qualified dividends. A retiree in a high-tax state gets the most from the bill’s state exemption. Account type can eliminate the whole question. The IRS notes that these investment-income rules do not apply to investments held in individual retirement arrangements (IRAs), section 401(k) plans, and other qualified retirement plans. In a traditional IRA, interest and dividends are taxed at ordinary income rates when withdrawn.

Who Each Income Source Suits

Treasury bills suit investors who want a known payout on a fixed date, live in high-tax states, and are willing to accept a new rate at every rollover. Dividend stocks such as Johnson & Johnson, Procter & Gamble, and Coca-Cola suit long-horizon investors seeking income that keeps up with prices and can hold through share drops like McDonald’s 17.11% decline. Verizon fits only investors who check coverage and debt quarterly. Watch weekly bill auctions and the Fed’s next decision for rollover yields, and upcoming dividend announcements for payout growth.

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