Top 5 Retirement Stocks Yielding Up to 8.04%
The current situation isn’t the greatest for retirees and those planning to retire. When the 10-year Treasury note is yielding a measly 1.83%, you probably want to add something else to your portfolio.
Fortunately, there are companies that provide much better yields than fixed-income products. But not all high-yield stocks are a good fit for your retirement portfolio. Quite often, a company’s yield is high simply because investors don’t believe those payouts will be sustainable. And then there are stocks with a huge upside but are kind of risky. Needless to say, they are not exactly the ones to provide you with reliable income either.
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The best dividend stocks to own in retirement are companies with wide economic moats in their industries that can keep raising their payout, regardless of where the economy is in the business cycle.
With that goal in mind, let’s take a look at the top five retirement stocks to watch in 2017.
1. Johnson & Johnson
Dividend investors should already be familiar with Johnson & Johnson (NYSE:JNJ) stock. While its 2.74% dividend yield doesn’t seem that impressive, the company’s ability to continue raising its payout makes it a rare find.
Being recession-proof is a great quality for retirement stocks. The economy moves in cycles; there are expansionary periods, and there are hard times. Having recession-proof stocks is a great way to build a portfolio that provides reliable income.
Johnson & Johnson makes products that consumers need rather than want. No one really craves products like “Band-Aid” and “Tylenol,” but once you need them, you have to get them.
The company markets over 100 different drugs in its Pharmaceutical segment. Thirty-four of them generate over $100.0 million in annual sales, with 11 drugs bringing in over $1.0 billion each. (Source: “Investor Fact Sheet,” Johnson & Johnson, last accessed November 7, 2016.)
That’s why Johnson & Johnson has managed to reward investors in both good times and bad. The company has raised its quarterly dividend rate every single year for the past 54 years, making JNJ stock a “dividend king.” Among the thousands of companies trading in the stock market, only 18 of them have raised dividends nonstop for more than five decades.
2. AT&T Inc.
AT&T Inc. (NYSE:T) stock’s dividend history isn’t as impressive of Johnson & Johnson’s, but that’s not to say that AT&T is not a great dividend stock. The telecom giant has been raising its payout every year for 33 consecutive years, making it a “dividend aristocrat.”
The neat thing about T stock is the high barrier to entry in the U.S. wireless communications industry. Essentially, the industry is dominated by four companies: AT&T, Verizon Communications Inc. (NYSE:VZ), Sprint Corp (NYSE:S), and T-Mobile US Inc (NASDAQ:TMUS). Together, these four companies possess over 90% of the market share.
The high barrier to entry means less competition, which might not be a good thing for consumers. But for AT&T stock investors, it means higher payouts from rising profits year after year.
The company currently has a quarter dividend rate of $0.49 per share, translating to an annual dividend yield of 5.33%.
3. Procter & Gamble Co
Procter & Gamble Co (NYSE:PG) is a “set-and-forget” type of investment. The company is deeply entrenched in the consumer staples business, which allows it to keep rewarding income investors with rising dividends.
A look at Procter & Gamble’s brands should tell you why it is a great retirement stock. With brands including “Tide,” “Bounty,” “Gillete,” “Crest,” and “Pampers,” PG could provide recession-proof income. The idea is that no matter how the economy is doing, people will always need toothpaste and laundry detergent.
Having established brands in slow-changing industries doesn’t sound very exciting, but that recipe has allowed Procter & Gamble to pay uninterrupted dividends for 126 years. Moreover, the company’s payout has increased each year over the past 60 years.
Right now, Procter & Gamble has a quarterly dividend rate of $0.6695 per share, translating to an annual yield of 3.1%.
4. Omega Healthcare Investors Inc
If you want to boost the yield of your retirement portfolio, you might want to take a look at Omega Healthcare Investors Inc (NYSE:OHI).
Omega Healthcare Investors is a real estate investment trust (REIT) focused on the long-term care industry. Its portfolio consists of approximately 90% skilled nursing facilities and 10% assisted living facilities. The company has over 1,000 locations in 42 states and the U.K. (Source: “Our Approach,” Omega Healthcare Investors Inc, last accessed November 7, 2016.)
With a quarterly dividend rate of $0.61 per share, OHI stock has an annual dividend yield of 8.04%. Now that’s impressive!
Note that the demand for long-term care is relatively inelastic to outside economic factors. This means healthcare REITs like Omega could survive economic downturns in better shape than, say, office and retail REITs.
5. Intel Corporation
Tech companies are not usually known as great picks for a retirement portfolio, but Intel Corporation (NASDAQ:INTC) stock could be an exception.
Intel is known for being the inventor of the “x86” series of microprocessors found in most personal computers (PCs) today. But the company’s business consists of a lot more than just PCs.
For instance, Intel is reaping rewards from the booming cloud computing industry. While the company is not known for being a direct provider of cloud computing services, its chips are found in servers powering most data centers today. In the third quarter of 2016, Intel’s Data Center Group revenue increased 10% year-over-year to $4.5 billion. (Source: “Intel Reports Record Quarterly Revenue of $15.8 Billion, Up 9 Percent Year-Over-Year; Operating Profit of $4.5 Billion,” Intel Corporation, October 18, 2016.)
The company is also benefiting from the rise of the Internet of Things (IoT) as well. Revenue from Intel’s IoT Group surged 19% year-over-year to an all-time record of $689.0 million.
Of course, investors have been worried that Intel’s PC business could go downhill. And while PC shipments have indeed been slowing down around the world, Intel’s Client Computing Group revenue went up five percent year-over-year in the third quarter.
Right now, Intel stock has a dividend yield of three percent. With the ability to capture growth in two of the hottest fields in tech today, cloud computing and the IoT, Intel could have even more monetizing potential in the future.
At the end of the day, keep in mind that there is no perfect retirement portfolio for everyone. People have different amounts of savings, income, and risk tolerance. A perfect retirement stock for someone else might not be a good one for you. Reviewing your own financial situation and level of risk aversion is crucial in building a retirement portfolio. Still, checking out the top retirement stocks to watch in 2017 list could be a good way to start.