10 Dividend Stocks for Retirement
The Top Dividend Stocks for Retirement
Looking for the best dividend stocks for your retirement portfolio? The best long-term strategy for a retirement portfolio is to include high-dividend-yield growth stocks that beat inflation and outperform the S&P 500 Index.
What qualities do the best dividend stocks for retirees have? The best dividend stocks provide high yield for income and they have a long history of increasing their annual dividends. They are also leaders in fields with high barriers to entry; this makes it difficult for competitors to jump. They also ensure a relatively safe and steady revenue stream, ultimately providing you with a safe, consistent, reliable income.
Adding the right dividend stocks will not only protect your nest egg, but also potentially help you retire early.
Below is a list of 10 excellent dividend stocks to consider for your retirement portfolio.
Headquarters: Columbus, Indiana
Share price: $128.52
Market capitalization: $21.58 billion
Forward P/E: 16.17
Annual sales: $18.20 billion
Dividend yield: 3.20%
Payout ratio: 53.13
Levered free cash flow: $1.65 billion
Cummins Inc. (NYSE:CMI) is the global leader in the diesel engine industry, with more than 7,200 locations in approximately 190 countries and territories. In 2015, Cummins had earnings of $1.4 billion on sales of $19.1 billion. The U.S. and Canada account for roughly 75% of its annual sales. (Source: “Investor Overview,” Cummins Inc., last accessed October 12, 2016.)
Because of its dominant market position, the company has been able to raise its annual dividend for the last 11 consecutive years. The company currently pays an annual dividend of 3.2%, or $4.20 per share. (Source: “Dividend Information,” Cummins Inc., last accessed October 12, 2016.)
Lockheed Martin Corporation
Headquarters: Bethesda, Maryland
Share price: $231.85
Market capitalization: $70.26 billion
Forward P/E: 18.39
Annual sales: $48.99 billion
Dividend yield: 2.83%
Payout ratio: 53.71%
Levered free cash flow: $3.57 billion.
Lockheed Martin Corporation (NYSE:LMT) is a global military contractor and aerospace company that serves the civil and commercial sectors. In 2015, the company reported revenue of $48.99 billion, with roughly 80% of that coming from contracts with the U.S. Department of Defense, the National Aeronautics and Space Administration (NASA), and other U.S. civil and intelligence agencies. Aeronautics is the biggest division, accounting for roughly 35% of sales. (Source: “2015 Sustainability Report,” Lockheed Martin Corporation, last accessed October 12, 2016.)
U.S. military spending isn’t going anywhere, nor is the Department of Defense, which makes Lockheed Martin one of the best stocks for retirement. And thanks to its exceptional operational and ongoing financial results, the company has been able to deliver more value to long-term shareholders.
As a result, the company’s strong cash flow will continue to help Lockheed Martin raise its generous dividend, which currently stands at 2.83%, or $6.60 per share. Next year (2017) will be the 15th consecutive year in which Lockheed Martin has raised its annual dividend. (Source: “Dividend Information,” Lockheed Martin Corporation, last accessed October 12, 2016.)
Headquarters: Minneapolis, Minnesota
Share price: $68.65
Market capitalization: $39.5 billion
Forward P/E: 12.89
Annual sales: $71.6 billion
Dividend yield: 3.49%
Payout ratio: 41.9%
Levered free cash flow: $3.94 billion
Target Corporation (NYSE:TGT) is the second-biggest general merchandise retailer in the U.S., operating around 1,800 Target and SuperTarget stores and 38 distribution centers. (Source: “Corporate Fact Sheet,” Target Corporation, last accessed October 12, 2016.)
Target’s web site is commonly ranked as one of the most-visited retail web sites, with over 63 million unique visitors each month. This is an addition to all the customers who still visit Target’s brick-and-mortar locations. (Source: “Meet Our Guests,” Target Corporation, last accessed October 12, 2016.)
Since the 2009 financial crisis, Target’s share price has been bullish. And despite the company’s share price taking a short-term hit from the weakening U.S. economy, Target continues to have solid momentum.
Target’s current dividend yield is 3.49%, or $2.40 per share, and has increased its dividend for 45 years straight. The company raised its dividend 7.1% in June to $0.60 and hasn’t missed a quarterly dividend payment since it went public in October 1967; that equals 196 consecutive quarters. (Source: “Target Corporation Announces 7.1% Dividend Increase,” Target Corporation, June 8, 2016.)
Target doesn’t just return cash to investors through dividends; it also has an aggressive share repurchase program. In September, Target announced a new $5.0-billion share repurchase program. The company will begin repurchasing shares under this new plan once its current $10.0-billion program ends, which is expected to be before the end of fiscal 2016. (Source: “Target Corporation Announces New $5 Billion Share Repurchase Program,” Target Corporation, September 21, 2016.)
Altria Group Inc
Headquarters: Richmond, Virginia
Share price: $61.80
Market capitalization: $121.12 billion
Forward P/E: 18.90
Annual sales: $19.1 billion
Dividend yield: 3.95%
Payout ratio: 78.2%
Levered free cash flow: $5.19 billion
“Sin stocks” are not for everyone. But for those investors who do not mind investing in cigarettes, Altria Group Inc (NYSE:MO) is one of the best dividend stocks for retirement.
Altria controls more than half the U.S. market, with leading brands such as “Marlboro,” “Copenhagen,” “Skoal,” “Black & Mild,” and e-vapor products “MarkTen” and “Green Smoke.” It also owns Ste. Michelle Wine Estates, a leading wine producer. (Source: “At-A-Glance,” Altria Group Inc, last accessed October 12, 2016.)
Not surprisingly, Altria makes a lot of money. From 2011 to 2015, Altria delivered a total shareholder return of 204%, which is more than twice the return of the S&P 500. The company also featured adjusted diluted earnings per share growth at a compound annual rate of approximately 8.1% during the same period. (Source: “Financial Strength,” Altria Group Inc, last accessed October 12, 2016.)
Simply put, Altria is an excellent high-growth dividend stock for retirement. The company currently pays an annual dividend of 3.95%, or $2.44 per share, and the annual dividend has grown 50 times over the past 47 years. (Source: “Stock & Dividend Information,” Altria Group Inc, last accessed October 12, 2016.)
Archer Daniels Midland Company
Headquarters: Chicago, Illinois
Share price: $42.17
Market capitalization: $24.52 billion
Forward P/E: 14.33
Annual sales: $63.02 billion
Dividend yield: 2.77%
Payout Ratio: 47.15%
Levered free cash flow: $2.09 billion
Archer Daniels Midland Company (NYSE:ADM) is one of the best high-dividend growth stocks for retirement. With 280 ingredient manufacturing facilities and 428 crop procurement locations, the company produces thousands of ingredients used worldwide in food, animal feed, nutrition, cosmetics, and even by the industrial and chemical industries. (Source: “ADM Facts,” Archer Daniels Midland Company, last accessed October 12, 2016.)
ADM also operates an extensive U.S. grain elevator and global transportation network that buys, stores, transports, and resells feed commodities for the agricultural processing industry.
In 2015, Archer-Daniels-Midland reported net revenue of $67.7 billion and earnings of $1.8 billion, or $2.98 per share.
It’s tough to beat a company like Archer Daniels Midland when it comes to strong capital appreciation and dividend growth. For the last 41 consecutive years, the company has increased its annual dividend. In 2006, Archer Daniels Midland paid out an annual dividend of $0.40 per share, and is on track to pay out $1.20 per share in 2016, for a 10-year increase of 200%. (Source: “Dividend & Split History,” Archer Daniels Midland Company, last accessed October 12, 2016.)
Chatham Lodging Trust
Headquarters: West Palm Beach, Florida
Share price: $17.86
Market capitalization: $683.0 million
Forward P/E: 8.19
Annual sales: $289.5 million
Dividend yield: 7.01%
Payout ratio: 139.3%
Levered free cash flow: $75.97 million
A real estate investment trust (REIT), Chatham Lodging Trust (NYSE:CLDT) invests in upscale extended-stay hotels, with its portfolio including the likes of Marriott International Inc (NASDAQ:MAR) and Hilton Worldwide Holdings Inc (NYSE:HLT), among others. The company also purchases select-service and full-service hotels. (Source: “Company Presentation June 2016,” Chatham Lodging Trust, June 3, 2016.)
Chatham is one of the best retirement stocks because, as a REIT, it has to legally distribute most of its earnings as dividends. Thanks to the company’s strong free cash flow, it provides an attractive and safe dividend yield of 7.01%, or $1.32 per share ($0.11 monthly). (Source: Dividends History, Chatham Lodging Trust, last accessed October 12, 2016.)
Headquarters: Atlanta, Georgia
Share price: $49.44
Market capitalization: $48.37 billion
Forward P/E: 16.64
Annual sales: $17.42 billion
Dividend yield: 4.50%
Payout ratio: 86.5%
Levered free cash flow: -$11.12 billion
Southern Co (NYSE:SO) is a utility company that serves more than nine million customers in the Southeast, with 44,000 megawatts of generating capacity and 1,500-billion cubic feet of combined natural gas consumption and throughput. (Source: “Our Business,” Southern Co, last accessed October 12, 2016.)
The company owns electric utilities in four states and natural gas distribution utilities in seven states. It is also a nationally recognized provider of customized energy solutions, as well as fiber optics and wireless communications.
Because of the company’s strong footprint across the Southern U.S., it has been able to provide investors with a quarterly dividend since 1948. In fact, it has raised its annual dividend for the last 16 years. (Source: “Dividends,” Southern Co, last accessed October 12, 2016.)
In 2007, the year before the financial crisis, Southern Co paid an annual dividend of $1.59; in 2016, the company is on track to pay $2.24 per share. Over the last 10 years, as some companies slash their dividends to save money, Southern Co has raised its dividend 41%.
Procter & Gamble Co
Headquarters: Cincinnati, Ohio
Share price: $88.33
Market capitalization: $235.72 billion
Forward P/E: 20.89
Annual sales: $65.3 billion
Dividend yield: 3.01%
Payout ratio: 70.1%
Levered free cash flow: $7.67 billion.
Procter & Gamble Co (NYSE:PG) is a consumer products behemoth with five billion customers in more than 180 countries. Some of the company’s industry-leading brands include “Head & Shoulders,” “Oral B,” “Always,” “Tide,” Pampers,” and more. (Source: “Company Strategy,” Procter & Gamble Co, last accessed October 12, 2016.)
Over the years, Procter & Gamble has been quietly rewarding long-term investors with both capital appreciation and dividend growth. The company currently pays an annual dividend of 3.01%, or $2.68 per share. As one of the best stocks for retirement, Procter & Gamble has raised its annual dividend for the last 60 consecutive years.
The Coca-Cola Co
Headquarters: Atlanta, Georgia
Share price: $41.50
Market capitalization: $179.75 billion
Forward P/E: 20.72
Annual sales: $43.25 billion
Dividend yield: 3.35%
Payout ratio: 78.16%
Levered free cash flow: $5.56 billion.
The Coca-Cola Company (NYSE:KO) is the world’s top non-alcoholic beverage company, offering thirsty customers an array of more than 3,500 different beverages. In addition to numerous “Coke”-branded products, the company makes “Minute Maid,” “Powerade,” “Dasani,” and “Sprite.”
Since the company’s products already blanket the world, you’re not going to see Coca-Cola reporting huge, double-digit gains in revenue and earnings. What investors do get, though, is consistent growth.
The Coca-Cola Co has paid a quarterly dividend since 1920 and has increased dividends for the last 54 years. Since 2000, Coke’s dividend yield has soared 106%, from $0.68 to $1.40 per share, or 3.35%, in 2016.
Johnson & Johnson
Headquarters: New Brunswick, New Jersey
Share price: $117.69
Market capitalization: $324.5 billion
Forward P/E: 16.59
Annual sales: $70.88 billion
Dividend yield: 2.67%
Payout ratio: 56.8%
Levered free cash flow $16.9 billion
Johnson & Johnson (NYSE:JNJ) is a diversified health care company that provides comprehensive and broadly based health care products. The company markets more than 100 drugs, 46 of which have annual sales over $50.0 million, 34 with over $100.0 million, and 11 with over $1.0 billion. (Source: “2015 Investor Fact Sheet,” Johnson & Johnson, last accessed October 12, 2016.)
Approximately 70% of sales are derived from products and businesses that are first or second in global market share position. Some of the company’s top brands include “Acuvue,” “OneTouch,” “Neutrogena,” “Band-Aid,” “Listerine,” “Tylenol,” “Stayfree,” “Sudafed,” “Benadryl,” “Zyrtec,” and “Motrin.”
Being a global industry giant is what makes Johnson & Johnson one of the best dividend growth stocks for retirement. Johnson & Johnson provides an annual dividend of 2.67%, or $3.20 per share, and has been able to raise its annual dividend for the last 54 consecutive years.