You can’t beat big blue-chip dividend stocks with a long history of uninterrupted and rising payouts for a safe income stream in a retirement portfolio.
Sure, there are plenty of high-quality corporate bonds with higher yields, but dividend stocks are less exposed to interest rate risk than fixed income.
If you’re really starved for yield, there’s no shortage of junk bonds and MLPs with fat percentages attached to their market prices — but only because they come with much higher risk.
Mega-capitalization stocks that have reliably raised and paid dividends for decades — in some cases since the 19th century — aren’t likely to let you down. Prices might change, but the income stream won’t. If anything, dividend hikes will amplify those streams and raise the yields on the original cost bases.
Ultimately, what we’re talking about is defense. Low-volatility stocks are going to tend to underperform the S&P 500 in a bull market, but they’ll hold up much better in a bear market, and that’s the key to long-term outperformance.
Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) is set up this way. Take care of the downside and the upside will take care of itself.
With that in mind, we selected three mega-cap blue-chip stocks with rock-solid dividends. Their payouts are generous by today’s standards and the shares offer low volatility. Here are three ultimate retirement dividend stocks.
Ultimate Retirement Dividend Stocks: AT&T Inc. (NYSE:T)
It’s tough to beat the telecommunications stocks for dividends, and the king of this defensive sector is AT&T Inc. (NYSE:T). No other mega-cap captures T’s combination of size and yield.
Indeed, it’s the only stock with a market cap greater than $250 billion that pays more than 4%. Only Verizon Communications Inc. (NYSE:VZ) — another solid choice — comes close.
Most importantly, this is a payout you can count on. T stock has paid dividends since 1984. It has never cut the dividend. And with a five-year beta of 0.34, it is far less volatile than the broader market.
Ultimate Retirement Dividend Stocks: Procter & Gamble Co (NYSE:PG)
Procter & Gamble Co (NYSE:PG) has delivered dividend increases for 59 consecutive years. Like AT&T, it’s a member of both InvestorPlace’s list of Dependable Dividend Stocks and the S&P Dividend Aristocrats Index.
Moreover, it has paid dividends since 1891. A company with a market cap of $225 billion that has paid dividends through two world wars, the Great Depression and the Great Recession will probably make it through your retirement too.
As a consumer noncyclical, PG stock adds ballast to any portfolio when times get tough. The five-year beta of 0.65 suggests that it’s decidedly less volatile than the broader market.
Ultimate Retirement Dividend Stocks: Exxon Mobil Corporation (NYSE:XOM)
When crude oil prices were plumbing the depths below $30 a barrel, there was only one energy sector dividend that you didn’t have to worry about: Exxon Mobil Corporation (NYSE:XOM).
That’s not just because the super major’s commitment to the payout is unquestioned, with 33 straight years of hikes. It’s because of the company’s massive diversification.
Cheap oil might hurt the upstream business, but it actually helps the downstream side of things. XOM was profitable throughout the rout in oil prices. XOM’s $390 billion market cap and 0.9 beta promise less volatility than the S&P 500.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.