Dividend stocks and retirement investors go hand in hand. After all, retirement investing is all about income and with the days of living off of bond interest long gone, dividend stocks have taken up the mantle.
But dividend stocks could even be better than bonds in some aspects.
That’s in part to their ability to raise payouts, dividend stocks can offer plenty of inflation protection as historically most firms will actually increase their dividends by more than interest rate hikes. Meanwhile, reinvested dividends offer higher compounding and downside protection.
With that, it’s no wonder why so many retirement investors have opted to include a hefty dose of dividends in their portfolios.
Looking to add some dividends to your portfolio? Here are seven dividend stocks that are perfect for retirement investors.
Dividend Stocks for Retirement: Realty Income (O)
Dividend Yield: 4.6%
For retirement investors, the name of the game is finding clockwork-like dividend payers. And you can’t get much better on that front than Realty Income (NYSE:O). The firm has paid out dividends for 48 straight years- delivered every single month. Even better is that O has increased those dividends for more than 80 consecutive quarters.
Powering those payouts is O’s more than 5,000 retail properties across 49 states. Realty Income’s freestanding properties include everything from convenience stores and restaurants to movie theaters, and automotive parts/services centers. There’s a good chance that your local Taco Bell or CVS (NYSE:CVS) is renting one of O’s buildings.
Even better is that these properties are all triple-net leased. That means that the tenant — not Realty Income — is responsible for the taxes, maintenance, and insurance on the property. REIT investors love triple-net leasers because they produce juicier margins for the owners.
That huge property portfolio and its ability to generate strong cash flows will continue to suit investors over the long haul. In the meantime, snagging O today will net you a high 4.6% dividend yield.
Dividend Stocks for Retirement: Aqua America (WTR)
Dividend Yield: 2.2%
That dripping sound you hear could be steady stream of dividends pouring into your wallet if you bet on Aqua America Inc (NYSE:WTR).
Aqua America is one of the largest water utilities in the United States. WTR owns and operates water operations for more than 3 million residents across eight states. The steadfast nature and need for clean drinking water continues to flood the firm with steady revenues.
The key for Aqua America over the years has been its strategy of smart acquisitions to grow its footprint. WTR will target smaller and struggling municipal water authorities within its operating areas. Many times, these small municipalities simply don’t have the kind of money they need to improve their water infrastructure. For Aqua America, it’s an easy way to add bolt-on assets, increase its scale and ultimately, its revenue stream.
Now, water is heavily regulated. So those revenues tend to grow slowly. WTR isn’t a tech stock after all. But those revenues do grow. And with that, Aqua America’s dividend continues to grow as well. WTR has increased its dividend by nearly 600% since its IPO in 1981.
All of that makes it a great dividend stock for retirement investors.
Dividend Stocks for Retirement: Brookfield Infrastructure Partners L.P. (BIP)
Dividend Yield: 4%
Owning infrastructure assets is one of the most things on the planet. But boring is beautiful when it comes to dividend stocks. Toll roads, transmission lines and steam pipelines produce a fair amount of steady cash flows from their users. And thanks to relatively stable fixed costs, that cash can flow back to retirement investors in the form of hefty dividends.
The average person can’t go buy a bridge. But what they can buy is shares of Brookfield Infrastructure Partners L.P. (NYSE:BIP).
Canadian asset manager Brookfield Asset Management. (NYSE:BAM) has had a long history of investing in infrastructure projects and several years ago, the firm decided to spin off many of them into BIP.
Since then, BIP has grown into a monster infrastructure owner- with its portfolio spans the globe and features a wide range of utilities, toll roads, railways, ports and other infrastructure assets. Those assets continue to provide steady and rising cash flows. More than 90% of Brookfield’s revenue is tied to long-term contracts with various inflation — and growth-related adjustments. Meanwhile, BIP benefits from some rich — instantly accreditive — drop-down transactions with its parent firm.
For retirement investors, BIP could be one of the best choices to find income today.
Dividend Stocks for Retirement: Union Pacific Corporation (UNP)
Dividend Yield: 2%
Monopolies are great for investors. And one of few legal monopolies left in the world happens to be railroads. That’s great news for Union Pacific Corporation (NYSE:UNP).
UNP happens to have the largest rail networks in the U.S. But perhaps, more importantly, that rail network connects all the major West Coast and Gulf Coast ports to eastern gateways as well as connects to Canada’s rail system and is the only railroad serving all six major Mexico gateways. It literally covers all of North America.
That puts UNP in the driver’s seat when it comes to expanding global trade. With the world’s economies finally cooking, UNP has continued to see rising freight loads of all kinds. This has helped on the earnings front.
It’s also helped boost Union Pacific’s dividend. The last increase was big time 10% jump. Today, UNP yields 2%.
Dividend Stocks for Retirement: Wal-Mart (WMT)
Dividend Yield: 2.1%
Wal-Mart Stores Inc (NYSE:WMT) needs no introduction. The firm is the largest retailer in the world and owns/operates thousands of brick & mortar stores across the globe. This leadership position has powered its dividend and share price for decades.
But with times changing, WMT is changing as well. The firm is becoming an online tour de force. Through a series of calculated moves, Wally World has gone hard into e-commerce to fend off Amazon.com, Inc. (NASDAQ:AMZN) and its kin.
Its buyout of Jet.com is looking like a major win, while its buyouts of smaller shopping sites, adding additional online shipping/pickup options and beefing up the number SKUs on Walmart.com all seem to be working. Last quarter, online sales jumped by 60%.
For investors, this continued growth ensures that WMT can keep its dividend growing for years to come. Ultimately, its omnichannel model and improved logistics will have it winning the e-commerce war.
Dividend Stocks for Retirement: Johnson & Johnson (JNJ)
Dividend Yield: 2.4%
Patent cliff? What patent cliff? That’s what investors in blue-chip Johnson & Johnson (NYSE:JNJ) are asking themselves these days. Unlike many pharmaceuticals, JNJ doesn’t seem to have to worry about the end of the blockbuster or refreshing its portfolio. And there is a good reason for that.
The firm’s empire spans more than 250 operating companies across a variety of healthcare subsectors. That includes consumer healthcare products and medical devices to advanced oncology and immunology drugs. JNJ really does it all.
And increasingly, that means taking the cash flows from boring businesses and plowing them into biotech and advanced medicines. JNJ has also moved recently into the fragmented ocular and vision care markets. All of these moves come with higher margins and bigger profits.
All of this will continue growing the firm’s dividend. Just has it has for over 50 years. When it comes to dividend stocks for retirement investors, JNJ is a prime choice.
Dividend Stocks for Retirement: Phillips 66 (PSX)
Dividend Yield: 2.8%
When it comes to the energy sector, there really is only one dividend stock investors should look at and that’s Phillips 66 (NYSE:PSX).
PSX is one of America’s largest refiners of crude oil. And that’s actually a great place to be. As energy prices have stayed low, Phillips has been able to feast on these lower feedstocks. Even better is that PSX does a bunch of chemicals refining. These products come with higher margins and bigger profits.
But the real win for dividend investors is that PSX has added a ton of midstream assets to its umbrella. That includes pipelines, shipping, terminaling and natural gas fractionation capacity. All of these assets have different return quotients and function differently than straight-up gasoline refining. Even better is that it has placed many of these assets in a taxed advantaged MLP.
What investors get is a total package that has turned PSX into an earnings machine. The firm has continued to realize steady and increasing earnings since its spin-off from ConocoPhillips (NYSE:COP). And those earnings have translated into big dividends. Phillips 66 has increased its dividend seven times since May 2012 at a 30% compounded annual growth rate. PSX currently yields 2.8%.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.