Special Report

5 AA-Rated Bulletproof Retirement Stocks

I’ve spent most of my career helping investors discover high-quality growth stocks that can deliver market-beating returns, but there is more to the story.

Many investors see this as boring, but I follow dividend stocks closely, too. Why?

Well, the reality is there has always been a need for safe income investments. And in 2022 that is looking more important than ever.

Right now, consumer and wholesale inflation are sitting at 40-year highs, Treasury yields have inverted, interest rates are climbing, and the Federal Reserve is playing catchup. Not to mention, the war in Ukraine triggered a depression in Russia, a recession in Europe, and a stall in U.S. economic growth.

The bottom line is that there’s a lot of uncertainty in the air, so investors are turning to safer investments, including dividend-paying stocks that should “zig” when the market “zags.” High-yielding dividend stocks can outpace inflation in the long term. And while inflation can cause volatility across most of the market, dividends are less volatile than stock prices and earnings.

Now, a dividend is a distribution from a company’s earnings paid directly to a class of its shareholders. It is up to the company when (or even if) it is paid. The dividends tend to be paid out on a quarterly basis, but some companies will pay a semiannual or annual dividend. Company management will always announce when it will be paid – including your deadline to buy the stock in order to receive this payout – and what the dividend will be per share. The yield varies, depending on the company’s actual dividend and where the stock price is at the time.

In some cases, you may be looking at a double-digit dividend yield. But as attractive as that may sound, I recommend you pump the brakes before investing. Chasing dividend yields alone can be downright dangerous.

Stocks are not like Treasury bonds or a savings account; there’s no guarantee that you will get your money back. There’s also no guarantee that any given company will continue paying a dividend. If you choose poorly, you could lose your capital as the stock price falls. Or, that nice juicy dividend could be slashed.

In most cases, dividend yields are tantalizingly high for a reason (the stocks are cheap and rightly so) – and are simply not supported by the fundamental earnings power of the business.

I don’t want to scare you away from dividends – far from it. I just want you to be aware of the risks. Investing in dividend stocks can be very lucrative. If you get it right, you can make a fortune. The best way to make big returns is by investing in a dividend stock that also boasts superior fundamentals. These stocks pack a one-two punch of share-price appreciation and a steady stream of income… with payouts that can be twice or five times what you get from a Treasury bond or savings account.

When I say superior fundamentals, I mean growing companies that are healthy and thriving. I also want to see strong buying pressure. Think of this as “following the money.” The more money that floods into a stock, the more momentum a stock has to rise. I measure eight key fundamental factors to determine if a company is growing…

  • Sales Growth
  • Operating Margin Growth
  • Earnings Growth
  • Earnings Momentum
  • Earnings Surprises
  • Analyst Earnings Revisions
  • Cash Flow
  • Return on Equity

I analyze the company’s fundamentals and buying pressure and then provide my analysis in easy-to-interpret A to F letter grades in my Portfolio Grader. I break down my analysis into three grades: My Fundamental Grade (the fundamentals), Quantitative Grade (buying pressure) and Total Grade, which is a combination of the Fundamental Grade and Quantitative Grade. I consider a stock fundamentally superior if it holds an A-rating for its Total Grade and at least a B-rating for its Fundamental Grade.

Now, as I mentioned, I also follow dividend stocks, and I do this with my Dividend Grader. I screen more than 1,000 dividend-paying stocks for four factors…

  • Dividend Trend
  • Dividend Reliability
  • Forward Dividend Growth
  • Earnings Yield

Its grading system is similar like Portfolio Grader, expect the Total Grade is based on the aforementioned factors rather than the stock’s fundamentals and buying pressure. A solid dividend stock will hold an A-rating for its Total Grade.

So, what constitutes a fundamentally superior dividend stock? First, it must hold an A-rating for its Total Grade in Dividend Grader. The dividend stock must also hold an A-rating in my Portfolio Grader. In other words, it’s an AA-rated stock. If the dividend stock holds an A-rating for its Quantitative Grade, that’s even better.

These stocks can be tricky to find, so I’m excited to say that I’ve found five AA-rated stocks that offer a solid blend of dividend and growth. Let’s take a look at each now…

Bulletproof Retirement Stock #1: CHRD

With operations primarily in the Williston Basin, Chord Energy Corporation (CHRD), formerly known as Oasis Petroleum, Inc., aims to develop unconventional oil and natural gas resources in North Dakota and Montana. The Williston Basin is known for its light, sweet crude oil, which is sold to refineries located throughout the U.S.

The company is one of the leading producers in the Williston Basin, with 497,000 net acres and 58.0 million barrels of oil equivalent produced per day in 2021. Breaking it down, Oasis Petroleum produced 37.0 million barrels of crude oil per day and 126.36 million cubic feet of natural gas per day last year.

Chord Energy achieved total oil volumes of 90 million barrels of oil per day and 158.6 million barrels of oil equivalent per day in the second quarter of fiscal year 2022. The combined company also reported second-quarter adjusted earnings of $7.30 per share and total revenue of $789.38 million, which compared to analysts’ estimates for $7.49 per share and revenue of $383 million.

Chord Energy plans to reward its shareholders by increasing its base dividend by 114% to $1.25 per share. The second-quarter dividend will be paid on August 30 to all shareholders of record on August 16. The stock has a 3.23% dividend yield.

Bulletproof Retirement Stock #2: CMC

Commercial Metals Company (CMC) is a leading manufacturer and recycler of steel and other metal products, with more than 50 scrap metal recycling facilities and more than 100 manufacturing locations around the world. The company, though, had humble beginnings with only one scrap yard in Dallas, Texas, back in 1915, and it expanded operations through the years with an eye on sustainability.

Today, Commercial Metals Company is the biggest manufacturer of steel reinforcing bar in the U.S., as well as a global leader in concrete reinforcement steel. The company’s steel products are used in everything from bridges and highways to skyscrapers, airports and hospitals.

Interestingly, the company recycles more than 19 billion pounds of metal each year, and its steelmaking process uses 82% less energy than traditional steelmakers. Commercial Metals Company also boasts that it produces 63% less carbon dioxide in its manufacture of steel. Clearly, CMC is focused on having “more green” operations to support sustainability efforts and create more shareholder value.

Speaking of shareholder value, Commercial Metals Company has paid a dividend for an incredible 145-straight quarters, and it has increased its dividend by about 17% in the past 10 years. The company most recently paid a quarterly dividend of $0.14 per share on July 13. The stock has a 1.46% dividend yield.

Commercial Metals Company is able to consistently pay and increase its dividend thanks to strong fundamentals. Back in mid-June, the company reported that earnings for its third quarter in fiscal year 2022 surged 150% year-over-year to $320.2 million, or $2.61 per share. That topped analysts’ estimates for $1.99 per share by 31.2%.

Looking forward to the fourth quarter in fiscal year 2022, analysts have upped earnings estimates by 39.5% in the past three months, which bodes well for another quarterly earnings surprise. Fourth-quarter earnings are now forecast to jump 90.5% year-over-year to $2.40 per share.

Bulletproof Retirement Stock #3: DVN

Devon Energy Corporation (DVN) is a leading energy company in the U.S. that focuses primarily on finding and producing oil and natural gas, with operations in the Anadarko Basin, the Delaware Basin, Eagle Ford, the Powder River Basin and the Williston Basin. The Delaware Basin in southeast New Mexico and west Texas is highly lucrative for the company, as it has about 400,000 net acres and horizontal drilling operations for oil and natural gas.

Production growth in the Delaware Basin is what drove the company’s stunning results, as Devon Energy produced 416,000 barrels of oil equivalent per day in the quarter. That represented a 34% increase over first-quarter production, thanks in part to 65 new wells. The company’s total fourth-quarter production averaged 611,000 barrels of oil equivalent.

For the first quarter in fiscal year 2022, the consensus estimate calls for earnings of $1.60 per share on $3.56 billion in revenue. That translates to 255.6% year-over-year earnings growth and 102% year-over-year revenue growth. Analysts have also increased first-quarter earnings estimates by nearly 12% in the past two months, so a fifth-straight quarterly earnings surprise is likely.

Also, Devon Energy has a long history of rewarding its shareholders: It’s paid a dividend for 116-straight quarters. The company will pay a fourth-quarter dividend of $1.00 per share on March 31 to all shareholders of record on March 14. The stock has a 8.35% dividend yield.

Bulletproof Retirement Stock #4: EOG

EOG Resources, Inc. (EOG) is one of the biggest oil and natural gas companies in the U.S., with proved reserves of 3.22 million barrels of oil equivalent (MMBoe). The company operates primarily in Texas, with operations in the Permian Basin, Eagle Ford and Barnett Shale, as well as locations in the Sichuan Basin in China and the Port of Spain in Trinidad & Tobago. The company has more than 11,500 drilling locations.

For the first quarter in fiscal year 2022, the current consensus estimate calls for earnings of $3.16 per share on $5.36 billion in revenue, which represents 95.1% year-over-year earnings growth and 45.2% year-over-year revenue growth. Analysts have also upped earnings estimates by 22% in the past three months, so a quarterly earnings surprise is likely.

Thanks to its strong fundamentals, EOG Resources has been able to pay a dividend for a stunning 129-straight quarters. The company will pay a quarterly dividend of $0.75 per share on April 29 to all shareholders of record on April 14. The stock has a 2.23% dividend yield.

Bulletproof Retirement Stock #5: SBR

For the past 40 years, Sabine Royalty Trust (SBR) has maintained royalty and mineral interests in proved crude oil and natural gas-producing properties in several states: Florida, Louisiana, Mississippi, New Mexico, Oklahoma and Texas. Since its inception, the trust has produced about 288 million cubic feet (Mcf) of natural gas and 23.1 million barrels of crude oil. In turn, Sabine Royalty Trust has returned about $1.47 billion to shareholders in the past four decades.

Given its robust production, Sabine Royalty Trust is able to reward its shareholders handsomely. The trust announced a September distribution of $0.84 per share, which was paid on September 29 to all shareholders of record on September 15. Sabine Royalty Trust noted the distribution is based on oil production in June (49,404 battels of oil) and natural gas production from May (1.23 million cubic feet).

During the second quarter, Sabine Royalty Trust achieved royalty income of $15.08 million, or a 116% year-over-year increase. The trust also reported second-quarter production of 151,116 barrels of oil and 1.96 million cubic feet of natural gas. The stock has a 9.32 % dividend yield.

Putting It All Together

And there you have it! Five AA-rated bulletproof retirement stocks.

As you now know, these companies offer the perfect blend of income and growth. So, if you’re looking to add more dividend-paying stocks to help smooth out your portfolio and better protect you in the current economic climate and wild market gyrations, these are five good stocks to start with.

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[Editor’s Note: The Portfolio Grader and Dividend Grader data is of 10/25/2022. The grades can fluctuate week-to-week, so please make sure to visit Dividend Grader here and Portfolio Grader here for the latest grades. The dividend yields are also subject to change.]