The 3 Best Dividend Stocks to Buy for Retirement

  • There are dividend stocks to buy, and there are those to load up on. These three companies are in the latter.
  • Johnson & Johnson (JNJ): It has the potential to continue with its strong track record of dividend growth.
  • McDonald’s Corporation (MCD): Checks some defensive boxes and provides dividend consistency.
  • Old Republic International (ORI): This company’s dividend track record speaks for itself.
dividend stocks to buy - The 3 Best Dividend Stocks to Buy for Retirement

Source: Dan Kosmayer / Shutterstock

Many older Americans are more scared about outliving their wealth than death itself. Accordingly, the search for dividend stocks to buy for retirement is one that many take seriously.

Dividend-paying stocks are often the go-to option for those nearing or in retirement. That’s partly because the passive income stream these equities generate can help bolster the social security income retirees receive. These stocks are also viewed positively for their fundamentals.

That’s because companies paying a dividend (in theory) must be profitable to do so. With a strong business model and solid margins come dividend increases over time. Thus, dividend stocks are often viewed as preferable to bonds, as the distributions provided can grow over time.

Of course, sifting through the many stocks that pay dividends to pick just a few to hold for the long-term isn’t easy. That said, here are dividend stocks to buy that I’m considering right now.

JNJ Johnson & Johnson $164.94
MCD McDonald’s $236.70
ORI Old Republic International $20.60

Johnson & Johnson (JNJ)

A red Johnson & Johnson (JNJ) sign hangs inside in Moscow, Russia.
Source: Alexander Tolstykh / Shutterstock.com

Johnson & Johnson (NYSE:JNJ) is a multinational pharmaceutical and consumer goods company which leads in many prominent categories. This very strong market position, which is driven by a portfolio of some of the world’s best brands, has provided the company with very solid fundamentals. Accordingly, it’s unsurprising to many long-term investors to see the company announce a $5 billion buyback program and continued dividend increases over time.

As far as dividend stocks to buy are concerned, JNJ stock may not necessarily be top of mind for most investors. After all, this stock yields only 2.7% at the time of writing. And with the 2-Year T-Bill now providing around 4.3%, that’s not going to cut it for many investors.

That said, it’s Johnson & Johnson’s free cash flow of $4.7 billion that’s worth considering. This cash flow number increased substantially quarter-over-quarter, and could continue higher, even in recessionary times. No matter what market we’re in, folks need to buy pharmaceuticals, toothpaste and toilet paper. That’s the allure of this blue-chip stock in this market.

Notably, Johnson & Johnson has one of the strongest track records of dividend growth in the US market. This company has increased its payouts consistently for 60 years. Retirees would do well to consider adding this global pharmaceutical giant to their portfolios on any dips moving forward.

McDonald’s (MCD)

A McDonald's (MCD) burger box and fries rest on a flat surface.
Source: 8th.creator / Shutterstock.com

The global fast food picture really wouldn’t be the same without McDonald’s (NYSE:MCD). Indeed, this long-term buy and hold for many investors provides some compelling growth metrics to consider. Over time, McDonald’s has proven what a world-class brand can do in terms of international expansion and same-store sales growth.

That said, this quick restaurant provider also offers investors some attractive dividend growth. Thus, as far as dividend stocks to buy are concerned, McDonald’s is right up there on my list right now.

The Chicago-based giant has a strong track record of consistently growing payouts. Ever since McDonald’s started dividend payments in 1976, it has increased its payout yearly.

Given this company’s rock-solid balance sheet and continued earnings per share growth over time, investors can expect nothing less than all-but-guaranteed dividend growth over time. Aside from the pandemic, when locations were forced to close, in most other recessionary times MCD stock has outperformed the market by a wide margin. Thus, this is a company providing a seriously defensive posture investors may want to gravitate toward right now.

Currently, the MCD stock yields 2.3%, which doesn’t seem that great, relative to bonds. That said, those thinking long-term will note that this yield should rise over time, along with its stock price. That’s the allure of this mega-cap stock.

Old Republic International (ORI)

A close-up shot of a hand choosing wooden blocks with emoticons related to health insurance. russell 2000 stocks
Source: Shutterstock

Old Republic International (NYSE:ORI) is not necessarily among the most well-known names out there. That said, this $6.5 billion market cap company is among the most reliable names in the insurance industry.

Since 1942, this company has paid a dividend without interruption. Even more impressive, Old Republic has raised its distribution for 41 consecutive years. Thus, those seeking not only passive income, but dividend growth, will appreciate this historical performance.

Generally speaking, when companies like Old Republic stick to their long-term dividend growth strategies, these stay in place for a very long time. That’s because investors start to view ORI stock as a bond-like proxy, and seek this stock for dividend growth specifically. Accordingly, investors can stand assured that this is a company that will do whatever it can to maintain, and raise, its distribution over time.

Old Republic’s fundamentals appear strong, with the company reporting an underwriting profit in its insurance business consistently. Over the long-term, this is an overlooked dividend stock to buy I think is very compelling at 6-times earnings right now.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.


Article printed from InvestorPlace Media, https://investorplace.com/2022/09/the-3-best-dividend-stocks-to-buy-for-retirement/.

©2022 InvestorPlace Media, LLC