Updated on August 30th, 2022 by Bob Ciura
Retirees have a different set of challenges in their investment planning, than other groups of investors. Investors in or nearing retirement might have to consider income replacement as a key component of their investment decisions. After all, retirees no longer have a regular paycheck from working to rely on.
In addition to traditional sources of retirement income such as pensions and/or Social Security, retirees can boost their ‘retirement paycheck’ income with dividend stocks. These are companies that pay shareholders regular income for owning the stock. Not all stocks pay dividends. But the consistent payments from dividend stocks can be a valuable source of income for retirees.
For these reasons, we recommend retired investors focus on quality blue-chip stocks. Blue-chip stocks are established, safe, dividend payers. They are often market leaders and tend to have a long history of paying rising dividends. Blue-chip stocks tend to remain profitable even during recessions.
You can download the complete list of all 350+ blue-chip stocks (plus important financial metrics such as dividend yield, P/E ratios, and payout ratios) by clicking below:
Investors who are interested in purchasing individual stocks should make sure they have researched each company, to ensure it is financially healthy with a strong business model, and future growth potential.
To help with the search, we reached out to two authors of popular investing websites as well as Sure Dividend writers for their individual recommendations. The following list represents these contributors’ favorite retirement dividend stocks for the remainder of 2022, in no particular order.
This article will discuss 11 top stocks to start your retirement portfolio, with an introduction detailing why income investors might want to invest in blue-chip stocks.
Table of Contents
You can instantly jump to any specific section of the article by clicking on the links below:
- Blue-Chip Stocks Overview
- Retire Before Dad: Costco Wholesale (COST)
- Prakash Kolli: Cisco Systems (CSCO)
- Nikolaos Sismanis: One Gas (OGS)
- Nate Parsh: Realty Income (O)
- Aristofanis Papadatos: Parker-Hannifin (PH)
- Felix Martinez: Medical Properties Trust (MPW)
- Quinn Mohammed: 3M Company (MMM)
- Josh Arnold: Innovative Industrial Properties (IIPR)
- Eli Inkrot: Verizon Communications (VZ)
- Bob Ciura: Johnson & Johnson (JNJ)
- Ben Reynolds: 3M Company (MMM)
Blue-Chip Stocks Overview
There is no exact definition of blue-chip stocks. Our definition is a company that has increased its dividend for over 10 years. This is a long enough period of time to see which companies are strong enough to raise dividends through the full economic cycle.
High dividend stocks are especially interesting right now, in the climate of record high stock prices and historically low interest rates. For example, the average yield of the S&P 500 Index is just 1.6% currently, a fairly unimpressive yield for investors who want to generate income from their stock portfolio.
Unfortunately, not all stocks with high dividend yields should be purchased. Some stocks have high dividend yields not because the company has increased the dividend payout, but rather because the stock price has plunged. Stock prices and dividend yields move in opposite direction–as a stock price declines, the dividend yield rises (and vice-versa).
Therefore, companies in distressed financial condition whose share prices are declining rapidly, will have a high dividend yield. But in some cases, an extremely high dividend yield is a precursor to a dividend cut or suspension, which is a bad outcome that investors want to avoid as much as possible.
This is why we recommend investors focus not just on stocks with high yields, but also stocks with long histories of raising dividends, strong business models, and durable competitive advantages. These qualities are the key factors we look for when considering retirement stocks.
The following 11 stocks do not necessarily have the highest dividend yields; instead, they have a combination of high yield plus dividend safety, a strong balance sheet, and a sustainable payout. As a result, they appeal to income investors looking for quality retirement stocks.
Best Retirement Stock #11: Costco Wholesale (COST)
This best dividend stock selection is from Craig with Retire Before Dad.
Investors beginning to build a retirement income portfolio should look for three attributes when buying individual stocks.
- Own businesses you know and understand.
- Buy stock in companies with conservative balance sheets.
- Aim for reliable dividend payers with a history of dividend growth.
One company that fits this mold is Costco. Costco is a wholesale retailer, operating more than 830 stores worldwide. Costco charges members a membership fee, providing consistent and predictable cash flow and reducing reliance on product profit margins. Costco purchases in bulk, allowing it to sell high-quality products to customers at an attractive value.
What I like most about Costco is its inventory model. Instead of filling the stores with every product imaginable, like Walmart or Target, Costco selectively carries only about 4,000 products in its stores, thereby focusing on quality and value while keeping a tidy inventory. Over the past decade, Costco has increased its e-commerce offerings and sales, but e-commerce was still less than 10% of total sales in 2021, leaving much room to grow.
At the end of FY Q3 (May 2022), Costco had $11.8 billion of cash and short-term investments on its balance sheet and $6.6 billion in debt. This conservative ratio should protect Costco against economic fluctuations and keep the dividend solvent. Costco has an 18-year dividend payment and growth streak, paying a current yield of only 0.66%. However, the company has increased its regular quarterly dividend by an average of 12.6% per year for the past decade and paid four special dividends ranging from $5 to $10 per share in that time frame. Costco’s dividend yield has averaged between 2% and 3% over the past decade, factoring in the special dividends.
Costco is a familiar business that is easy to understand, has a conservative balance sheet, and pays a reliable dividend that grows above even today’s high inflation rate. Costco’s membership model and pricing power should help it weather economic uncertainty and pay dependable retirement income. Expect to pay a premium for high-quality companies such as Costco. Consider dollar cost averaging into a position and aim to hold for a decade or longer to benefit from special distributions and dividend growth.
Costco’s membership model and pricing power should help it weather economic uncertainty and pay dependable retirement income.
Best Retirement Stock #10: Cisco Systems (CSCO)
This best dividend stock selection is from Prakash Kolli of Dividend Power.
International Business Machines should be at the top of your list for retirement income stocks. It has paid a dividend for over 100 years, and the forward dividend yield is 5%+. Moreover, IBM’s stock price is down only about 2.3% in the past year and 4.7% year-to-date, indicating it provides some downside protection during a period of rising interest rates.
After acquiring RedHat in 2019 and divesting its unprofitable Managed Infrastructure Service business, IBM is a market leader in hybrid cloud and consulting services. Also, the company has an effective monopoly in mainframes with a 90%+ market share. IBM’s hardware and software processes credit card transactions, hotel and airline reservations, bank transactions, etc.
IBM’s dividend yield is more than 5%, making it one of the highest-yielding S&P 500 Index stocks. Additionally, the dividend yield exceeds the 5-year average of about 4.77% and is more than three times the S&P 500 Index’s average dividend yield.
Source: Portfolio Insight
Besides a high dividend yield suitable for retirement income, IBM is a Dividend Aristocrat with 27 years of increases. However, the dividend growth rate has slowed in the past few years because of a high payout ratio and net debt. As a result, the company is more focused on bolt-on acquisitions and deleveraging.
Still, the dividend growth rate was approximately 3.56% in the trailing five years and 8.49% in the past decade. The payout ratio of ~69% is a little high but acceptable, and the dividend is safe based on free cash flow coverage.
IBM is trading at a forward price-to-earnings (P/E) ratio of approximately 14, within the range in the past 5-years. Consequently, investors seeking retirement income to create a passive income stream to live off dividends can acquire a stock yielding 5%+ with acceptable dividend safety. As a result, I view IBM as a long-term buy.
Disclosure: Long IBM
Author Bio: Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor and blogger on dividend growth stocks and financial independence. Some of his writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial blogs. He also works as a part-time freelance equity analyst with a leading newsletter on dividend stocks. He was recently in the top 1.0% and 100 (73 out of over 13,450) of financial bloggers as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.
Disclaimer: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.
Best Retirement Stock #9: One Gas (OGS)
This best dividend stock selection is from Nikolaos Sismanis.
Oklahoma-based ONE Gas is one of the largest publicly traded natural gas utilities in the United States. The company provides natural gas distribution services to approximately 2.2 million customers. Specifically, ONE Gas holds market shares of 88%, 72%, and 13% in Oklahoma, Kansas, and Texas, respectively.
The 3.0%-yielding company should make a great addition to any retirement portfolio in its early stages due to shares offering both income and growth prospects. ONE Gas’ operating cash flows are relatively resilient due to natural gas consumption levels being mostly predictable, especially during the winter months.
Further, due to the company’s dominant market share in 2/3 states it operates in, ONE Gas should continue to gradually grow its net income, powered by incremental population/customer growth and base rate increases as approved by regulators. Increased profitability is also being supported by economies of scale kicking in as the company expands its distribution network.
In fact, over the past seven years, earnings per share have grown on average by 9.3% per year. Following increased profitability, the company has been able to grow its dividends to shareholders by a compound average growth rate of 15.6% over the same period. In particular, dividends have grown annually since 2014, when ONE Gas was spun off from ONEOK. The payout ratio stands at a healthy 61%, in line with management’s target range of between 55% and 65%.
Source: SEC filings, Author
By combining predictable rate increases (which management expects to land between 8% and 9% through 2026) and growth CAPEX, earnings per share are expected to grow between 6% and 8% over the next four years. Accordingly, management has targeted dividend per share growth of between 6% and 8% over the same period.
Management’s multi-year outlook is what truly differentiates ONE Gas from other companies when it comes to serving a retirement portfolio, as it allows for great investor visibility and reduced levels of uncertainty.
Best Retirement Stock #8: Realty Income (O)
This best dividend stock selection is from Nate Parsh.
Investors should focus on owning the best names in the market when designing a portfolio that can provide income for retirement. Companies that have a dominant industry position are often able to navigate challenging economic conditions. Many of these companies also have long histories of raising dividends, making their stocks good sources of income.
Realty Income Corporation possess all of these qualities, making the stock a strong candidate for purchase.
Realty Income is a Real Estate Investment Trust, or REIT that specializes in single-tenant standalone properties, which is a highly fragmented industry, making it ripe for consolidation. Following a series of acquisitions, which included spinning off its weaker office space unit, the trust has more than 11,400 properties in its portfolio, a footprint that is largely unmatched by peers. Approximately 43% of rent comes from tenants with an investment grade
The trust has come a long way since its initial public offering in 1994.
Source: Investor Presentation
Realty Income operates a highly diversified business model, which includes 1,125clients spread across 72 different industries. No client accounts for more than 4.1% of the portfolio and no industry contributes more than 10.2% of annual revenue. The trust has properties in every U.S. state and recently expanded to the U.K. and Spain through a merger with VEREIT.
The trust’s business model has worked for a very long period of time. Funds from operation have a compound annual growth rate of 7% for the 2012 to 2021 period of time. This growth rate is even more impressive when taking the ballooning of the share count into consideration. Realty Income’s share count has more than quadrupled over the last decade as the trust has used share issuances to grow its business.
A strong business model has enabled Realty Income to declared 625 consecutive monthly dividends since the trust went public in 1994. The trust has raised its dividend more than 116 times over the last 27 consecutive years, making Realty Income one of three REITs that qualify as a Dividend Aristocrat.
The trust’s dividend growth streak is likely to continue as its projected payout ratio for 2022 is just 74%, below the 10-year average payout ratio of 84%. Shares of Realty Income yield 4.2%, which is almost triple the average yield for the S&P 500.
Best Retirement Stock #7: Parker-Hannifin (PH)
This best dividend stock selection is from Aristofanis Papadatos
Parker-Hannifin is a diversified industrial manufacturer that specializes in motion and control technologies. The company was founded in 1917 and has grown to a market capitalization of $37 billion with annual revenues of nearly $16 billion.
Despite its industrial nature, Parker-Hannifin operates in a niche market, with products that are obscure but essential to the customers of the company. As a result, Parker-Hannifin enjoys a wide business moat. This is clearly reflected in the exceptional dividend growth record of the company. Parker-Hannifin has raised its dividend for 66 consecutive years and thus it belongs to the best-of-breed group of Dividend Kings.
Parker-Hannifin has achieved its admirable dividend growth record thanks to its consistent earnings growth. During the last decade, the company has grown its earnings per share by 9.7% per year on average, from $7.45 in 2012 to $18.72 in fiscal 2022, which ended on June 30th. It has accomplished such a strong performance primarily thanks to a series of acquisitions. It has acquired smaller companies and has incorporated their products efficiently in its own portfolio while it has also enjoyed great synergies from these acquisitions.
Even better for the shareholders, business momentum has accelerated in recent years.
Source: Investor Presentation
Notably the industrial manufacturer has exceeded the analysts’ earnings-per-share estimates for more than 20 consecutive quarters. It also achieved record sales, operating margins and earnings per share in fiscal 2022. All these facts are testaments to the strong business momentum of the company and its reliable growth trajectory. In addition, it reflects the impressive resilience of the company to the coronavirus crisis.
Moreover, Parker-Hannifin is currently in the process of acquiring Meggitt, a global leader in aerospace and defense motion and control technologies, for $8.8 billion in cash. Meggitt offers technology and products on every major aircraft platform and has annual revenues of $2.3 billion. As the deal value is 24% of the market capitalization of Parker-Hannifin and the revenues of Meggitt are 14% of the revenues of Parker-Hannifin, the transaction is likely to prove a major growth driver for the company. Overall, investors should rest assured that Parker-Hannifin is likely to remain in its long-term growth trajectory, mostly thanks to the acquisition of smaller manufacturers.
Best Retirement Stock #6: Medical Properties Trust (MPW)
This best dividend stock selection is from Felix Martinez.
Medical Properties Trust is a self-advised real estate investment trust formed in 2003 to acquire and develop net-leased hospital facilities. Right now, the company is one of the world’s largest owners of hospitals, with roughly 440 facilities and 46,000 licensed beds in ten countries and across four continents.
The company is a dividend challenger with nine consecutive years of dividend growth. The company has a five-year compounded annual dividend growth rate of 4.3%. The company announced the most recent dividend increase in February 2022, when the company announced a 4% dividend increase. The company currently pays an attractive dividend yield of 7.6%, much higher than its five-year average of 5.9%.
Free Cash Flow (FCF) has grown 4.9%/annually since 2012. Analysts are expecting FCF growth of 5.3% for the next three years. For Fiscal Year (FY)2022, analysts expect that the company will make $1.43 per share in FCF, which will increase by 4% compared to FY2021. This will provide investors with a safe dividend payout ratio, based on the 2022 FCF, of 81%.
Something to consider is the fact that the company continued to pay and raise its dividend during the 2020 COVID-19 Pandemic. While most REITs cut or suspended their dividend, MPW increased its dividend by 3.8% in 2020 and 3.7% in 2021.
Currently, the stock is attractively valued at 10.6x forward FCF. If the company reverts to its normal P/FCF of 13.8, this will provide a fair price of $19.73 per share. Based on today’s price of $14.80, the stock is 33.3% undervalued.
Best Retirement Stock #5: 3M Company (MMM)
This best dividend stock selection is from Quinn Mohammed.
3M is a leading global manufacturer, with operations in over 70 countries. The company’s product portfolio is comprised of over 60,000 items, which are sold to customers in more than 200 countries. These products are used every day in homes, office buildings, schools, hospitals, and more. 3M has paid dividends to shareholders for over 100 years.
Leadership recently downgraded 2022 guidance and sees organic sales growth of -2.5% to -0.5%, and earnings-per-share of $10.30 to $10.80. Our 2022 EPS estimate is now $10.55, a 4.2% increase over 2021 actual EPS. The company is still growing, and we estimate annual EPS growth of 5.0% over the intermediate term.
The company is currently prioritizing their investments in large, fast-growing sectors across the globe. Some examples are automotive technology, home improvement, personal safety, healthcare, and electronics.
On July 26th, 2022, 3M announced the spin off of their health care business in an effort to unlock value for shareholders. This is a major announcement, as the healthcare business itself generates over $8 billion in annual sales.
Source: Investor Presentation
The new 3M will consist of the segments which generated $26.8 billion of sales in 2021, while the healthcare spin-off will retain the product portfolio which generated $8.6 billion of sales in 2021.
3M’s technology and intellectual property are its most important competitive advantages. These unique advantages have laid the foundation for 3M to raise its annual dividend for over 60 years without fail.
3M has more than 50 technology platforms and a team of scientists dedicated to creating innovation. Innovation has made it possible for 3M to obtain over 100,000 patents throughout its history, which keeps many potential competitors at arm’s length. 3M continues to invest heavily in research and development and aims to spend around 6% of annual sales on R&D.
3M is a Dividend King and has raised its dividend for 64 years straight. In the last ten years, its dividend has grown at a compound annual rate of nearly 10%. 3M pays an annual dividend of $5.96, and at the current share price, has a strong yield of 4.7%. Based on our current earnings estimate, 3M boasts a payout ratio of roughly 56%, which is quite safe. Furthermore, we expect the payout ratio to come down in future years.
Even though the company remained profitable during the Great Recession, this does not mean it is immune to recessions. However, it is this consistent profitability that has afforded 3M the ability to continue increasing its dividend through multiple economic cycles. 3M is currently trading well under our fair value estimate and could be a great addition to a retirement portfolio.
Best Retirement Stock #4: Innovative Industrial Properties (IIPR)
This best dividend stock selection is from Josh Arnold.
Innovative Industrial Properties is the only publicly-traded REIT that specializes in serving the burgeoning cannabis industry in the US. Given that, the trust has been afforded a massive head start in what is an extremely fragmented industry, and its portfolio is growing quite quickly as a result.
We expect 15% annual growth in FFO-per-share in the years to come, driven primarily by strong revenue growth, which is attributable to portfolio expansion.
Source: Investor presentation, page 8
IIPR has seen its portfolio grow from one property in 2016 to over 100 today, across about 40% of the US. The trust has grown to about $270 million in annual revenue on this high rate of portfolio expansion as more states legalize cannabis use.
IIPR’s sale-leaseback model is highly beneficial to tenants because it frees up their capital to invest in their businesses, rather than their real estate. IIPR also has a 100% triple-net lease structure in place, so it has no capex, and tenants pay all expenses.
Not only do we see 15% growth ahead, but IIPR offers a 7.3% dividend yield today, putting it in elite company on a yield basis. The trust has raised its dividend more than 10 times since 2017, but we note the current level of the dividend is stretched.
Finally, IIPR trades for under 13 times FFO-per-share for this year, which is well below our estimate of fair value at 16 times. With the current price of $96 representing just 74% of fair value, we also see potential for a meaningful valuation tailwind in the years to come. That combination of valuation, dividend yield, and FFO growth makes IIPR my top stock pick for starting a retirement portfolio.
About this best dividend stock selection’s author: Josh Arnold is an independent equity analyst and a prolific writer on the subject of dividend stocks. His work can be seen here on Sure Dividend, as well as other financial sites such as Seeking Alpha.
Best Retirement Stock #3: Verizon Communications (VZ)
This best dividend stock selection is from Eli Inkrot of Sure Dividend.
Verizon Communications is one of the largest wireless carriers in the country, with a network covering ~300 million people and ~98% of the U.S. The security’s dividend has also been covering the cash flow needs of retirees for some time.
Many might think of the business as a slow grower, but Verizon has shown some impressive results in recent years:
Source: Verizon Investor Day 2022
In the 2011 through 2021 period, Verizon has grown its earnings-per-share by 9.6% annually. However, over that same period, the dividend per share grew by a compound annual growth rate of just 2.5%, meaning the company’s payout ratio declined substantially over this time frame. Today the dividend payment makes up less than half of earnings, allowing for an ample dividend yield, but it also allows the company to reinvest in its business, keep a strong balance sheet, and repurchase shares.
Moreover, while earnings and dividends have continued to climb, Verizon’s share price has languished. This makes today’s value proposition more interesting.
In the Sure Analysis Research Database, we are forecasting the potential for 16.6% annualized total returns over the next five years. This is driven by the 5.8% starting yield, 4% expected growth rate and an 8.7% gain from the possibility of a valuation tailwind.
Naturally just because this is forecast, this does not make it so. All sorts of things can happen in the investment world. However, Verizon has a variety of positive qualities for a retirement portfolio including a high and sustainable dividend yield, the possibility for growth as the company continues to upgrade its network, and a below average valuation.
Disclosure: I am long VZ.
About this best dividend stock selection’s author: Eli Inkrot is President of Premium Services at Sure Dividend, overseeing the Sure Analysis Research Database, Newsletters and Special Reports. Previously, Eli was an analyst in private real estate, VP and Portfolio Manager for a money management firm, VP for a financial software company and an independent equity analyst. Eli received a degree in Business and Economics from Otterbein University and a Master’s in Finance from the University of Tampa, where he was named the “most outstanding graduate student.”
Best Retirement Stock #2: Johnson & Johnson (JNJ)
This best dividend stock selection is from Bob Ciura of Sure Dividend.
Retirees have a different set of priorities than younger investors. Specifically, retirees are typically more concerned with preservation of capital and generating income. As a result, my best stock pick for a retirement portfolio is healthcare giant Johnson & Johnson.
J&J has an exemplary dividend history. The company has increased its dividend for over 60 consecutive years, giving it one of the longest streaks in the entire stock market.
The company’s most recent earnings report was delivered on July 19th 2022, for the second quarter. Results were better than expected on both revenue and profits, but the company lowered guidance for the full year, which it attributed to a much stronger US dollar.
Source: Investor presentation, page 14
For the second quarter, adjusted earnings-per-share came to $2.59, which was four cents ahead of expectations. Revenue was $24 billion, up 3% year-over-year and $180 million ahead of estimates. Operational growth, which adjusts for certain non-recurring items such as COVID-19 vaccine sales, rose 8% during the quarter.
The company has very large businesses spread across pharmaceuticals, medical devices, and consumer products.
J&J is about to spin off its consumer division, but it will still remain a global leader in two major healthcare categories. After the spin-off, the company will possess 25 individual platforms or products that each generate at least $1 billion in annual sales.
Its global dominance is an added competitive advantage. J&J generates over 70% of its annual revenue from products that hold the #1 or #2 global market position. The company’s industry leadership provides it with steady profitability and growth, even when the economy enters a recession.
Another margin of safety for investors is the company’s pristine balance sheet. J&J is one of only two U.S. companies (the other being Microsoft) that has a ‘AAA’ credit rating from Standard & Poor’s.
J&J stock has a 2.8% dividend yield. And, J&J provides one of the safest business models in the world, along with reliable dividend increases each year.
About this best dividend stock selection’s author: Bob Ciura is President of Content at Sure Dividend. He has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Prior to joining Sure Dividend, Bob was an independent equity analyst publishing his research with various outlets including The Motley Fool and Seeking Alpha. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.
Best Retirement Stock #1: V.F. Corp. (VFC)
This best dividend stock selection is from Ben Reynolds of Sure Dividend.
V.F. Corp. is an apparel company founded in 1899. The company owns recognizable brands including: Timberland, The North Face, Vans, Supreme, Dickies, and many others. Notably, the company is vertically integrated and owns most of its supply chain. The company currently trades with a market cap of $17 billion.
The stock’s high dividend yield of 4.6%. And V.F.’s dividend history doesn’t disappoint either – the company has 49 years of consecutive dividend increases. One more year of dividend increases, and the company will join the exclusive Dividend Kings group.
A company cannot grow its dividend for nearly five decades without a competitive advantage. V.F.’s competitive advantage is its clothing brands. These clothing brands have proven surpassingly recession resistant, allowing V.F. Corp. to historically increase its dividend through recessions. The company also managed to remain profitable in 2020 during the peak of COVID-19 closures, although earnings-per-share did fall from $2.68 in 2019 to $1.31 in 2020 before recovering to $3.18 in 2022.
And, the company currently has a reasonable payout ratio of 65% of our expected fiscal 2022 earnings-per-share of $3.10. Given the company’s long history of rising dividends and reasonable payout ratio, we believe the dividend is secure.
But the dividend isn’t just secure – we believe future growth in both dividends per share and earnings-per-share is likely for V.F. Corp. We expect growth on both the top and bottom lines as the company continues to recover post-Covid. Additionally, share repurchases will likely provide a small tailwind to growth on a per share basis.
All told, we believe the company has stronger – albeit more volatile – growth prospects after its 2019 Kontoor Brands (KTB) spinoff where it offloaded its Wrangler and Lee jeans brands. We expect earnings-per-share growth of 7% annually over the next five years at V.F. Corp.
V.F.’s. stock currently trades for a price-to-earnings ratio of just 14.0 using our expected fiscal 2022 earnings-per-share of $3.10. We believe a price-to-earnings ratio of 19.0 better reflects fair value. If the company were to return to its fair value price-to-earnings ratio in 5 years, this would add 6.3% to total returns. Valuation returns, plus the 7% expected growth rate and the 4.8% dividend yield give us high expected total returns of 18.1% annually over the next five years for V.F. Corp.
About this best dividend stock selection’s author: Ben Reynolds founded Sure Dividend in 2014. Reynolds has long held a passion for business in general and investing in particular. He graduated Summa Cum Laude with a bachelor’s degree in Finance and a minor in Chinese studies from The University of Houston. Today, Reynolds enjoys watching movies, reading, and exercising (not at the same time) in his spare time.
Dividend stocks are attractive for investors, particularly retirees, due to their income payouts. But investors need to research each individual stock before buying, to make sure the dividend payout is sustainable. This is especially true in an uncertain economic climate. For example, many high-yield stocks cut or suspended their dividends in 2020 due to the coronavirus pandemic.
The 11 stocks in this article all have leadership positions in their respective industries, along with durable competitive advantages. They also have strong earnings to support their hefty dividends, which will help secure the dividend even in an economic downturn. As a result, these are top stocks for investors to start their retirement portfolios.
Other Dividend Lists
The following lists contain many more high-quality dividend stocks:
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500.
- The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.
- The Complete List of Russell 2000 Stocks: arguably the world’s best-known benchmark for small-cap U.S. stocks.
- The Best DRIP Stocks: The top 15 Dividend Aristocrats with no-fee dividend reinvestment plans.
- The 2022 High ROIC Stocks List: The top 10 stocks with high returns on invested capital.
- The 2022 High Beta Stocks List: The 100 stocks in the S&P 500 Index with the highest beta.
- The 2022 Low Beta Stocks List: The 100 stocks in the S&P 500 Index with the lowest beta.