There is a lot of anxiety in the fixed income markets, which is especially unsettling for folks living on fixed incomes.
Bond yields — forever the backbone of the fixed income investor — have vanished. But the entire concept of retirement investing is built on having investments that are considered safe. Retirees aren’t crazy about risk; they want to know their life savings are safe in investments designed to offer capital preservation while throwing off that regular monthly income.
However, they’ve been forced to move further out on the risk curve in order to replace those bond yields. That means many are now buying dividend stocks.
Of course, there is a wide range of dividend stocks out there. But for retirees who want safety, the best investments are companies that are both powerhouses and that have a long history of paying dividends — death-defying dividend stocks, if you will. I’m particularly focused on dividend stocks that maintained their payments during the financial crisis.
Here are three of the best dividend stocks if you’re seeking safety.
Death-Defying Dividend Stocks: Coca-Cola (KO)
Dividend Yield: 2.92%
Coca-Cola Co. (KO) definitely checks all the boxes for our list of death-defying dividend stocks. When I first began investing in 1995, KO stock was my first purchase. I wanted safety, security and dividend payments for my first foray. And this stock has only improved since that day some 19 years ago.
Dividend stocks like Coca-Cola always ran the risk of resting on their laurels, but KO has done anything but that. In fact, it’s mind-blowing how many brands and beverages the company now owns. Management remains on the cutting edge too, as evidenced by its recently-announced 10% ownership stake in Green Mountain Coffee Roasters (GMCR).
Today, Coca-Cola stock pays a nearly 3% yield, and its dividend remained solidly in place during the financial crisis. In fact, KO has paid a dividend since 1920. For the cherry on top, its free cash flow runs between $7 billion and $8 billion dollars annually, so Coca-Cola can easily afford the $4.6 billion it pays out.
Death-Defying Dividend Stocks: Dupont (DD)
Dividend Yield: 2.82%
Dupont (DD), which by the way is short for E.I. du Pont de Nemours & Company, is also one of the most solid dividend stocks you will find. Sure, a chemical company isn’t the sexiest play in the world, and it is amazing that all the chemophobia and negative publicity surrounding chemicals hasn’t really affected its business.
But like KO, DD stock has remained on the forefront of changing times. Dupont is slowly transforming its straight-up chemical business into a more agricultural-driven entity. The company’s agribusiness saw an 18% increase in sales in the most recent quarter, driven by its newest products: corn seed and insecticides.
That’s just one reason DD, with its 2.8% yield, is still one of the best dividend stocks. Plus, the payout has historically been about 50% of free cash flow.
Death-Defying Dividend Stocks: Genuine Parts Co. (GPC)
Dividend Yield: 2.53%
One of my favorite boring companies also makes our list of the best dividend stocks for retirees. Genuine Parts Co. (GPC) is a name you may not know … but you have probably heard of its 1,100 Napa Auto Part stores.
I love auto parts companies because there are zillions of cars on the road, all of which age, need maintenance and therefore need parts. There’s an endless supply … kind of like coffee drinkers and smokers.
Plus, GPC has a lot to like that specific to the world of dividend stocks. Its payout is solid as a rock, yielding over 2.5%, and rarely does that amount exceed 50% of free cash flow.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. Alas, he sold his Coke stock in 1999.