Dividend stocks are still hot as a pistol … and why not? Yields on 10-year Treasuries still are hovering around 2%, and let’s not even get into the meager returns offered by money markets and CDs.
So yes, those of us trying to sock away money for retirement tomorrow — or living off dividends today — are smart to search for steady names in the income space.
Of course, the best tried-and-true retirement stocks are ones with a long history of paying and increasing dividends … and that also have enough product clout so they won’t run out of customers down the line. You can find just that in these five dividend stocks:
Dividend Yield: 2.8%
Sure, it’s no longer the absolute favorite of Berkshire Hathaway (NYSE:BRK.A, BRK.B) — that honor now belongs to Wells Fargo (NYSE:WFC) — but it remains one of Warren Buffett’s longest and largest holdings.
The beverage giant is a bastion of longevity — it’s been around for more than a century, it has paid a dividend since 1920, and it has improved that payout for more than 50 consecutive years. Its product line has expanded well beyond its bread-’n’-butter cola offering, including Powerade energy drinks, Dasani water and Minute Maid juice drinks. Coca-Cola also has a global reach, offering their products in over 200 countries.
With free cash flow of $8 billion last year and a payout ratio of 52%, investors can expect to see Coca-Cola pad its dividend — currently yielding 2.8% — for the foreseeable future.
Dividend Yield: 3.1%
Another king of its field — this time, fast food — McDonald’s (NYSE:MCD) has provided investors with an annual dividend increase for 37 years.
There’s no reason to believe the next 37 years will be any different.
To be sure, their have been some stumbles, as same-store sales slowed late last year amid what appeared to be concerns over McDonald’s food offerings, which were considered generally unhealthy. But MCD historically has been a master innovator, and already the trend is turning — menus are now packed with healthy offerings like salads and fruit smoothies, and the company continues to tweak both its offerings and its store models around the world.
MCD generates a healthy $1 billion per year in free cash flow and boasts a cash stash of almost $2.3 billion — more than enough to power dividend increases for a very, very long time. Meanwhile, its current yield is already plenty juicy at 3.1% — and that’s with stock prices near all-time highs.
Dividend Yield: 4.9%
One of the great corporate icons in the U.S. is AT&T (NYSE:T) — which most people of my age still identifies with communications, both land-based and now mobile.
Indeed, AT&T offers the largest 4G network in the U.S., and the most most wireless phones that work in the most countries of any U.S. carrier.
AT&T also is continuing to find new ways to generate revenue; its U-Verse platform is the fastest-growing television provider in the U.S., surpassing rival Verizon (NYSE:VZ).
T shares currently yield a traffic-stopping 5%, and has improved its dividend for more than 20 consecutive years. With $5 billion in cash and $4 billion in free cash flow, the beat should go on.
Dividend Yield: 2.4%
Brush your teeth this morning? Wash your hair? Put on a little after-shave? It’s a good bet that Colgate-Palmolive (NYSE:CL) made at least one of the products you used.
Consumer stocks are generally viewed as “defensive” plays against the market, and Colgate is one of the best, with a history of product innovation, as well as a worldwide reach.
Indeed, InvestorPlace‘s Dan Burrows likes the entire sector, but provides some extra incentive for a dividend play at Colgate, particularly since the stock will split, making it a little more attractive to retail investors.
Colgate just upped its dividend, increasing its streak of consecutive annual increases to 49 years, with a five-year annual growth rate of just under 12%. So enjoy a healthy 2.4% dividend yield and prepare to cash those quarterly checks long into the future.
Dividend Yield: 3.3%
The company is relatively new to dividend payouts compared to the other stocks on this list, having started in 2003 with an 8-cent quarterly payout — but it’s now paying nearly triple that in a decade’s time.
Yes, the stock has languished for nearly a decade and people love to bash Microsoft as “dead money,” but MSFT isn’t going anywhere. Its enjoys 95% market share in productivity software (Office), 75% of all operating systems in use, and a nearly 75% share of of the server software market, according to Forbes. The competition is rough, but an install base that is hard to crack gives Microsoft the opportunity to keep improving search engine product Bing and put its Xbox video game console in the center of more households.
Plus, Microsoft sits on one heck of a cushion — $68 billion in cash and generates billions more in free cash flow every quarter. Thus, MSFT should not only be paying that dividend for a long time, but it should have plenty of ammo for increases over time. Considering the yield already sits at a healthy 3.3%, that should be music to retirees’ ears.
Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he was long MSFT.