The honest comparison

Secondary market annuities vs. dividend stocks

A secondary market annuity pays a higher current estimated yield, roughly 4 to 7 percent, fixed and court-ordered, with no price swings. Dividend stocks pay less today but can grow and stay liquid. One is certainty, the other is growth. Here is the trade, side by side, so you can decide which income each dollar should buy.

Side by side

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	Secondary market annuity	Dividend stocks
Type of income	Fixed, contractual schedule set in advance	Variable dividends set by each company's board, which can be raised or cut
Typical yield	4–7% effective annual, locked at purchase	Roughly 1–2% for a broad index, more for dividend-focused funds, plus potential growth
Principal stability	No market price swings; you collect the scheduled payments	Share price moves daily and can fall sharply
What backs the income	A top-rated carrier or state lottery, plus a court order	A company's earnings and its board's willingness to keep paying
Growth and upside	None; the schedule is fixed	Dividends can grow and shares can appreciate over time
Inflation response	Level unless bought with an annual increase	Dividends and prices can rise with inflation over the long run
Liquidity	Limited; no public market. Resale or reassignment possible with our help, not guaranteed	Highly liquid; sell your shares any business day

What this means for investors: On current income, a fixed payment stream usually pays a higher estimated yield than dividend stocks, and it will not swing in price or cut its payment. The trade-off is liquidity: a payment stream is far less liquid than a stock, not more. Dividend shares can be sold on any business day, while these payment rights have no public market. Resale or reassignment may be possible with our assistance but is not guaranteed, at a price that moves with prevailing interest rates. Many investors hold both: stocks for growth and liquidity, a payment stream for dependable income they will not need to touch.

What you are really choosing

The choice is not which asset is good. Both can be. It is which job you need done. If the goal is the most reliable income per dollar, with no chance a board cuts the payment and no daily price to watch, a fixed payment stream is hard to beat. You lock the yield the day you buy, and the carrier sends the checks on schedule. You can see what that yield looks like on any stream with our yield calculator.

If the goal is to grow the income and keep the money reachable, dividend stocks earn their place. A rising dividend can outpace inflation over time, and you can sell your shares on any business day. The price of that flexibility is volatility and the real possibility of a cut in a hard year. A payment stream trades that flexibility away on purpose, in exchange for the higher fixed yield and the court order behind it.

For most income investors the answer is not either-or. Dividends handle growth and liquidity; a payment stream anchors the base of dependable income. Where the payment stream fits against the rest of a fixed-income plan is the subject of our fixed income alternatives guide, and whether it suits you at all is covered in are they a good investment.

Questions we hear most

Are secondary market annuities better than dividend stocks?

Neither is better in the abstract; they solve different problems. A secondary market annuity gives you a higher current yield that is fixed and court-ordered, with no price volatility if you hold to term. Dividend stocks pay less today but can grow the dividend and appreciate, at the cost of daily price swings and the risk of a dividend cut. Certainty and current income point to the payment stream; growth and liquidity point to the stocks.

Which yields more, a secondary market annuity or dividend stocks?

On current income, a secondary market annuity usually yields more. Estimated effective yields run roughly 4 to 7 percent and are locked at purchase, while a broad dividend index often yields only 1 to 2 percent. Dividend investors are partly paid in growth rather than current yield, so the comparison is really fixed income now versus lower income that may grow.

Are dividend stocks safer than secondary market annuities?

They carry different risks rather than more or less. Dividend stocks expose you to market volatility and the chance a company cuts its dividend, but they stay liquid and diversifiable. A payment stream removes price volatility and fixes the income, but concentrates the risk in one carrier and gives up liquidity and guaranty coverage. Diversification favors the stocks; certainty of the payment favors the stream.

Can I hold both in a portfolio?

Yes, and many investors do. A common approach uses dividend stocks for growth, liquidity, and an inflation hedge, and a payment stream for the long-dated, higher-yielding, no-volatility part of the income plan. They complement each other more than they compete.

What these assets are, and what they are not

Guaranteed and life-contingent structured settlement payment rights, and lottery payment rights, represent the right to receive factored payments that Pacific Structured Assets purchases and assigns to investors through a court-approved process. They are purchased at a discount to their total scheduled payments.

These payment rights are NOT annuities, NOT insurance products, and NOT securities registered with the U.S. Securities and Exchange Commission. They are not bank deposits, are not FDIC-insured, and are not protected by any state insurance guaranty association. The industry term “secondary market annuity” refers to these payment rights and does not mean you are purchasing an insurance annuity contract.

You acquire the right to receive the payments, not the underlying annuity. The annuity itself does not change hands. Unlike the original structured settlement annuity, which may be shielded from creditors under applicable law, the assigned payment rights you purchase generally do not carry that creditor or bankruptcy protection.

Assigned annuities, offered as a separate product line, are existing insurance annuity contracts reassigned to a new owner through a change of ownership or an irrevocable change of payee.

These are long-term holdings with limited liquidity, and may not be suitable for every investor. There is no public trading market and no daily price. Resale or reassignment of a payment stream to another buyer may be possible, and Pacific Structured Assets can assist, but a resale is not guaranteed and the price it would bring is not guaranteed. Because the payments are fixed, that resale value moves with prevailing interest rates: an investor could realize a gain if rates have fallen since purchase, or a loss if rates have risen. These holdings are best suited to capital an investor can commit for the long term. Nothing on this website is tax, legal, financial, or investment advice. Consult your own advisors before investing.

Pacific Structured Assets, Inc. does not provide tax, legal, financial or accounting advice. The material on this website has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial or accounting advisors before engaging in any transaction, including the acquisition of factored structured settlement payments. Pacific Structured Assets is not registered with the Securities and Exchange Commission and is not licensed to sell insurance in any state.

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Secondary market annuities vs. dividend stocks

Side by side

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