3 best dividend-paying stocks for retirement

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A retirement portfolio should be built on a foundation of strong stocks and fixed income assets across a variety of industries. But one of the most important aspects of a great retirement stock is that it pays a dividend, because those payments will help your portfolio thrive during times of market turmoil.

In order to help you find stocks that will help you get through retirement financially, three Motley Fool contributors recommend three dividend-paying stocks that can be solid additions to your retirement portfolio.

Image source: Getty Images.

A powerful payer for your wallet

Eric Volkman (Consolidated Edison): One of the strongest dividend paying stocks on the scene is Consolidated Edison (NYSE: ED), the long-standing utility that supplies electricity and natural gas to New York City and surrounding areas. Con Ed’s dividend increases, as New Yorkers like to call it, are so reliable the company is a dividend aristocrat – one of the few S&P 500 index stocks that have increased their payouts at least once a year for at least 25 consecutive years.

In fact, before long, Con Ed will join an even more exclusive club, that of the Dividend Kings. These are the companies that have made the minimum increase of once a year for at least 50 years. Right now, the company’s streak stands at 47.

Con Ed has the power (ahem) to keep increasing payouts as he fuels a voracious market that is never satisfied. New York City is known to be a 24-hour municipality, and Con Ed plays a major role in keeping those lights up. As a utility in a rather heavily regulated environment, its revenues (around $ 12 billion and vary annually) don’t change much.

Still, the business can take advantage of the efficiency gains, which in good times helps increase profitability. Even in bad times, he manages to earn a lot of coins. For example, despite the daunting challenge of the coronavirus pandemic last year – in which many home and business customers left the overcrowded city in hopes of escaping infection – Con Ed has landed well in the dark on the bottom line, at just over $ 1.1 billion. .

New York City is already breaking out of its coronavirus bunker, and Con Ed should benefit in proportion. Recently, the company was targeting annual growth of 4% to 6% over the next five years, which is an impressive rate for the slow-burning utilities industry.

Con Ed also has a bright future ahead of him as a major producer of renewable energies, especially solar, whose demand will only increase in an increasingly green world.

No one finds utilities an exciting investment, and the coronavirus crisis has caused some investors to abandon Con Ed. As a result, the company’s stock price has fallen and its dividend yield has increased. In fact, with the latter at a relatively high rate of 4.2%, the stock is one of the top 10 returns among dividend aristocrats.

Of course, over 4% is a good deal for anyone looking for a good source of income. And given Con Ed’s rock solid business and its ideal position to take advantage of New York’s latest comeback, we can expect happy growth in both fundamentals and the share price.

A pot full of coins that say dividends.

Image source: Getty Images.

“Once bitten, twice shy” can create a great opportunity

Chuck Saletta (Kinder Morgan): Energy pipeline giant Kinder Morgan (NYSE: KMI) currently offers investors a return of almost 6%. Better yet, he’s delivering that return after completing a massive transformation that began when he was forced to cut his dividend in late 2015 to protect his balance sheet.

This is important to understand because it means that Kinder Morgan today is a much stronger company than it was before its dividend cuts. Today’s dividend is much more sustainable, and while its dividend growth rate has recently fallen below expectations, its cash flow – and therefore dividend coverage – remains strong. With natural gas and petroleum usage expected to remain stable or increase over the next several decades, its pipelines are likely to remain in demand for a long time.

As a retiree looking for dividends, this should matter a lot. After all, when a dividend is reduced, the company’s shares often fall too. Once you retire, you no longer have a salary to count on to cover your costs or replenish your investments if they evaporate. As a result, having a good reason to believe that your dividend stream can continue should be of paramount importance, as a reduction could decimate both your income and your nest egg.

If even that isn’t enough to make Kinder Morgan an attractive dividend-paying stock to consider, there’s another key reason. Generally speaking, it is both politically difficult and economically costly to build new pipeline capacity. This helps protect operators like Kinder Morgan who already have a large number of existing pipelines in their networks.

Put it all together and Kinder Morgan has:

  • A decently high return that seems well covered by cash flow
  • A healthier balance sheet than before
  • Good reason to believe that his business will remain in demand for decades
  • Some level of built-in protection against new competitors

With such a combination, dividend-seeking retirees could do a lot worse than consider this pipeline giant.

Mickey and Minnie in front of a Disney castle.

Image source: Walt Disney.

The best dividend-paying stock currently not paying a dividend

Barbara Eisner Bayer (Walt Disney): I’m taking a risk here by recommending a dividend-paying stock that doesn’t currently pay a dividend. But its strong growth prospects and history of stability outweigh this fact.

When you were little you were probably in love with Walt disney (NYSE: DIS) and his universe of characters, films and television shows. And if you are a parent or a grandparent, your children and grandchildren are probably in love with them too. You might not particularly like Mickey Mouse, but there has to be a cartoon character or superhero that you adore that comes to life in Disney’s monstrous ecosystem.

Yes, Disney suffered tremendously during the pandemic as it had to close its theme parks and cruise ships. Fiscal year 2020 showed the worst results on record – and yet the stock rose 73.7% from April 2020 to April 2021. In 2019, before the pandemic hit, more than 178 million people visited Disney parks around the world – and these people were losing a lot of moola in the company’s coffers.

The parks are now reopening and Disney is raising prices. And if you have to take the kids to Disney (and of course you have to!), You’re going to pay higher prices, which means even more money for the media company. Consumers might not like the higher costs, but when the kids scream to try the new rides and take pictures with Ariel, is the price really an issue?

The company’s future extends beyond its theme parks and cruise ships: Disney is a content creation machine and media juggernaut that plans to release 100 new titles per year over the next several years. .

When it launched its Disney + streaming service in November 2019, it topped all ratings for subscribers – and it’s only just starting to open the service globally. Clearly, Disney + saved the company during the pandemic and already claims more than 100 million subscribers. But streaming is going to play a huge role in its future. According to digital TV research, revenues from online media properties are expected to double between 2019 and 2025, and Disney is at the forefront of capitalizing on this growth.

To top it off, Disney has traditionally been a good dividend payer and has had a history of increasing dividends. However, during the pandemic, it temporarily suspended its dividend – saving the company $ 3.2 billion.

Management has said they plan to start paying dividends again soon, and there is no reason to doubt that. Meanwhile, investors unhappy with the lack of dividend payments have been appeased by the 73.7% rise in the share price.

So even though there is no current dividend, Disney gets my vote as one of the best dividend stocks to add to your portfolio. Management’s decision turned out to be brilliant for the company, and bold leadership is one of the things I look for when picking a stock for my retirement years.

Disney has been around since 1923 and has only grown and improved. The company is here to stay and no slowdown in growth is in sight. And that’s why, even though the dividend is temporarily on hold, it’s one of the best stocks you can buy for your retirement portfolio.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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