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: CMRE

Costamare, Inc. (CMRE) is one of the leading owners and operators of containerships in the world. The company currently operates a fleet of 77 containerships, including a variety of sizes, such as Panamax, post-Panamax and feeder. Costamare mainly serves the liner industry, as several of the major international liner companies are customers, including Cosco, Evergreen, Hapag-Lloyd, Maersk, MSC and Yang Ming. Costamare also has a fleet of 46 dry bulk vessels that range in sizes from Kamsarmax, Panamax, Ultramax, Supramax and Handysize, and haul a variety of bulks like coal, grains and iron ore, as well as bauxite, fertilizers and steel.

Last year was a record one for Costamare, as the company benefited from a “firm” containership market and strong demand amidst supply shortages and port bottlenecks. The company achieved adjusted earnings of $289.87 million, or $2.36 per share, and revenue of $793.64 million, which represented 134.4% annual earnings growth and 72.4% annual revenue growth.

I suspect that containership prices will remain high in 2022 due to possible suspensions at the Shanghai port, which is the largest container port in the world, and ongoing supply chain glitches. As a result, this year is also anticipated to be another strong one for Costamare: The analyst community is looking for 83.5% annual earnings growth and 48.1% annual revenue growth in fiscal year 2022. Analysts have also increased earnings estimates for the first and second quarters, as well as for full year, which bodes well for future earnings surprises.

Thanks to increased cash flows and profitability, Costamare also remains committed to rewarding its shareholders. The company has paid a dividend for 44-straight quarters. Most recently, Costamare paid a quarterly dividend of $0.115 per share on February 7. The stock has a 3.1% dividend yield.

Bulletproof Retirement Stock #2: 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 6.7% dividend yield.

Bulletproof Retirement Stock #3: 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 2.5% dividend yield.

Bulletproof Retirement Stock #4: SBLK

Star Bulk Carriers Corporation (SBLK) is a shipping company that primarily transports dry bulk cargoes around the world. Its fleet is comprised of 128 ships that range from Supramax vessels to Newcastlemax vessels. StarBulk Carriers’ vessels have a total capacity of more than 14 million dead weight tons, and they haul major bulks like grain, iron ore and minerals, as well as minor bulks like bauxite, fertilizers and steel products.

Thanks to “favorable market conditions,” Star Bulk Carriers achieved exceptional results in its fourth quarter and fiscal year 2021. Fourth-quarter revenue soared 168.7% year-over-year to $499.86 million, up from $186.02 million in the same quarter a year ago. Adjusted earnings surged 886.7% year-over-year to $2.96 per share, compared to $0.30 per share in the fourth quarter of 2020. The analyst community was expecting adjusted earnings of $2.52 per share on $417.19 million in revenue, so the dry bulk shipper posted a 17.5% earnings surprise and a 20% revenue surprise.

For its fiscal year 2021, Star Bulk Carriers reported adjusted earnings of $6.82 per share and revenue of $1.43 billion. That represents 3,911.8% annual earnings growth and 106% annual revenue growth. These results also beat estimates for adjusted earnings of $6.44 per share and revenue of $1.22 billion.

For its first quarter in fiscal year 2022, the analyst community is calling for earnings to surge 266.7% year-over-year to $1.31 per share, up from earnings of $0.36 per share in the same quarter of last year. Revenue is expected to jump 48.8% year-over-year to $298.32 million, up from $200.47 million in the same quarter of last year.

I should that the company most recently paid a dividend of $2.00 per share on March 15 to all shareholders of record on March 2. The stock boasts a whopping 28% dividend yield.

Bulletproof Retirement Stock #5: STLD

While it may be one of the youngest steel companies in the U.S. as it was founded in 1993, Steel Dynamics, Inc. (STLD) is one of the biggest producers of carbon steel products in the nation. It ranks number-three among American steel producers, with a production capacity of 13 million tons.

Steel Dynamics operates six steel mills, eight steel processing facilities, two iron production facilities, more than 90 metals recycling plants and six steel fabrication plants. Through these facilities, the company produces a wide variety of steel products, including structural, rail, flat roll, joists and decking, as well as liquid pig iron and processed copper.

And strong demand for these products has added handsomely to the company’s top and bottom line. Steel Dynamics reported blowout earnings results for its fourth quarter in fiscal year 2021. Sales soared 104.2% year-over-year to $5.31 billion, up from $2.6 billion in the same quarter a year ago. This was in-line with analysts’ expectations. Fourth-quarter adjusted earnings surged 495.9% year-over-year to $5.78 per share, compared to $0.97 per share in the fourth quarter of 2020. Analysts were expecting adjusted earnings of $5.64 per share, so STLD posted a 2.5% earnings surprise.

During its fiscal year 2021, Steel Dynamics noted that it shipped 11.2 million tons of steel and 789,000 tons of steel fabrication. In turn, the company achieved record 2021 sales of $18.4 billion and adjusted earnings of $16.09 per share. That represents 91.7% annual sales growth and 466.5% annual earnings growth. The consensus estimate called for full-year adjusted earnings of $16.08 per share on $18.29 billion in sales.

Looking forward, Steel Dynamics expects North American steel demand and consumption to continue to steadily increase in 2022. Company management commented, “Based on our record steel fabrication order backlog extending through most of 2022, combined with the continued strength of order activity and broad customer optimism, we believe construction will remain strong in the coming year … Steel Dynamics is in a position of strength as we enter 2022.”

The company has paid a dividend for 71-straight years. It most recently paid a quarterly dividend of $0.34 per share on April 15 to all shareholders of record on March 31. The stock has a 1.6% 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 4/11/2022. 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.]