Just because you’re retired doesn’t mean you can stop thinking about income streams — they just won’t be coming from a regular paycheck anymore.
One income possibility is stocks that pay investors a regular dividend. Not only will your investment grow as the stocks rise in value, but you’ll be getting a regular cash payment. And even if the stock doesn’t perform as well, dividend companies typically still make shareholder payments.
Companies that pay dividends are more established, lower-growth companies, but within that group there are still varying levels of risk to be had. We screened for companies that delivered dividend yields at least as high as the S&P 500 — 1.88 percent — and then scrubbed the results to offer suggestions for low, modest and high-risk investors. Read on to see our picks, and learn more about why dividend stocks are great for retiree investors.
Income Stocks for Low-Risk Investors
For the most conservative investors, we looked for stocks that had grown their dividend for the past 25 years (known on Wall Street as Dividend Aristocrats). They also had to yield more than 2.39 percent. We also required that each of these candidates had grown its earnings for the past five years and was expected to continue to do so for the next five years. Why? No earnings, no dividends. Our final screen was to find stocks in which the Wall Street consensus was that there was upside in the stock. That is, the stock price target was higher than where it was trading. Only five stocks met these criteria so they are a good fit for careful retirees.
- Ticker: ABBV
- Recent price: $74.63
- 52-week range: $55.06 – $75.04
- Yield: 3.56 percent
AbbVie is a pharmaceutical company that was spun out of Abbott Labs at the beginning of 2013. No worries here because there is a long record of success (and dividend payments). Abbott was founded in 1888 and went public in 1929. AbbVie’s top drug is Humira, which patients may use to treat rheumatoid arthritis or Crohn’s disease.
2. Federal Realty Investment Trust
- Ticker: FRT
- Recent price: $130.48
- 52-week Range: $120.50 – $171.08
- Yield: 3.02 percent
Federal Realty is a real estate investment trust based in Rockville, Md. It was founded in 1962 and has increased its dividend rate for 49 consecutive years. A REIT is akin to a real estate mutual fund, in which the portfolio’s holdings are properties. REITs must pay out at least 90 percent of their taxable income to shareholders.
Learn More about REITs: How to Invest in Real Estate
- Ticker: KMB
- Recent price: $125.28
- 52-week range: $111.30 – $136.21
- Yield: 3.13 percent
Kimberly-Clark is a consumer goods company based in Dallas, Texas. Its brands include Kleenex, Huggies and Kotex. Yes, it’s a veteran too. The firm was founded in 1872 in Neenah, Wis.
4. Leggett & Platt
- Ticker: LEG
- Recent price: $52.65
- 52-week range: $44.02 – $54.97
- Yield: 2.74 percent
Based in Carthage, Mo., Leggett & Platt manufactures parts that are in other companies’ branded home furnishings and fixtures. The company invented a new type of bedspring back in the 1880s, and it still makes components for bedding manufacturers today. It has been a public company since 1967.
- Ticker: PEP
- Recent price: $116.63
- 52-week range: $98.50 – $118.24
- Yield: 2.79 percent
The origins of Pepsico go back to 1898, when Pepsi-Cola was first formulated. Today, Pepsico has been diversifying into growth areas; its soda contribution to total sales is less than 25 percent. Pepsico is headquartered in Purchase, N.Y.
Income Stocks for Moderate-Risk Investors
For retirees who are willing to take on a little more risk, we branched out to add stocks that offer reasonable income in this yield-starved market, but may have more price risk and reward. This next group hasn’t always grown its dividends, but investors have set a price target higher than where the stock is currently trading. Having that regular dividend payment is a great way to balance the risk of the stock market, and another advantage of dividend stocks for retiree investors.
- Ticker: MO
- Recent price: $73.42
- 52-week range: $60.82 – $77.79
- Yield: 3.32 percent
Altria is the domestic operations arm that was split off from cigarette giant Philip Morris in March 2008. Like soda for Pepsico, tobacco for Altria is permanently declining. However, few industries have ever generated as much cash as cigarettes, so Altria’s dividend is safe. Furthermore, in an uncertain market like today’s, investors flock to steady consumer staple stocks. This stock’s 20 percent annualized return before dividends since its 2008 split has been more akin to a sexy tech stock.
2. Home Depot
- Ticker: HD
- Recent price: $146.65
- 52-week range: $119.20 – $160.86
- Yield: 2.33 percent
Home Depot and Lowe’s (LOW) should continue to flourish in the home improvement market. We chose the former to recommend because its yield is a bit higher and because over the years it has been a more profitable and consistent company.
Want to save money at the home improvement store while your investment is earning money? Learn the secret ways to save money at Home Depot.
3. U.S. Bancorp
- Ticker: USB
- Recent price: $52.12
- 52-week range: $41.13 – $56.61
- Yield: 2.15 percent
Although U.S. Bancorp is a large bank, it’s a super-regional headquartered far from Wall Street in Minneapolis, Minn. This may be a good thing, because the company avoided — as did its investors — most of the subprime shenanigans that other banks perpetrated that led us to the Great Recession.
- Ticker: HBI
- Recent price: $23.55
- 52-week range: $18.91 – $28.24
- Yield: 2.59 percent
Over the years, this stock has been more than good; it executed a 4-for-1 stock split and a dividend increase of 33 percent in 2015. As long as Hanesbrands isn’t disintermediated by internet brands like Amazon, then its income-seeking investors should do just fine.
- Ticker: PAYX
- Recent price: $57.20
- 52-week range: $52.78 – $63.03
- Yield: 3.52 percent
We all want to get paid, so thankfully there’s Paychex payroll processing. Although this stock hasn’t kept up with the market over the past decade, its investors still have been solidly in the black. Including its hefty 3.5 percent dividend yield, we expect that these shares will continue to earn about ten percent per year.
Income Stocks for High-Risk Investors
The next five names have either relatively high yields that may be worth risk to capture, have greater potential price appreciation, or both. If you’re looking for more stocks to invest in, these companies are the best short-term stock investments.
1. The Blackstone Group
- Ticker: BX
- Recent price: $34.42
- 52-week range: $23.33 – $35.09
- Yield: 10.01 percent
No, Blackstone’s yield is not a typo. The problem is that its dividend isn’t assured. Blackstone is a private equity firm that buys stakes in companies and then rewards its investors when it cashes out by selling them or bringing them public. Blackstone’s founder and CEO Steve Schwarzman is a Wall Street legend. We think that he and his team will keep their mojo going in the future.
- Ticker: CTL
- Recent price: $23.37
- 52-week range: $22.26 – $33.45
- Yield: 9.52 percent
This stock has been a dog with fleas in the past. Its only saving grace has been its hefty dividends. Why would we recommend a bad telecommunications company even to risky investors? Because CenturyLink is merging with a better firm, Level 3 (LVLT), and we’re hoping that when the deal closes the former’s management will make the best business decision they could and fire themselves.
3. Bristol-Myers Squibb
- Ticker: BMY
- Recent price: $55.65
- 52-week range: $46.01 – $76.80
- Yield: 2.83 percent
The pharmaceutical industry has been full of booms and busts. Drugs cost so much to develop, and too few are blockbusters. Nonetheless, Bristol-Myers has made progress recently with its medications pipeline. For example, the Food and Drug Administration recently approved the company’s Orencia rheumatoid arthritis drug.
4. Texas Instruments
- Ticker: TXN
- Recent price: $81.70
- 52-week range: $64.74 – $84.65
- Yield: 2.43 percent
Usually when a tech stock has a high yield, the company has thrown in the towel on growth. You may have noticed that several of the tech titans of the 1980s and 1990s (like IBM) pay steep dividends but no longer grow much faster than economy at large. Contrary to other tech dinosaurs, Texas Instruments, which was founded in 1951 to produce silicon transistors, may see sales, earnings and cash flow reaccelerate, as it has repositioned its products to meet the demands of the large, emerging Internet of Things market.
5. Phillips 66
- Ticker: PSX
- Recent price: $82.85
- 52-week range: $73.82 – $88.87
- Yield: 3.4 percent
Phillips 66 are the refinery operations that spun off from ConocoPhillips in 2012. The last thing that you’ll hear from most pros in 2017 is the recommendation to pick an energy stock. There are 11 economic sectors that compose the S&P 500. Year to date, ten are up and the energy sector is down a lot. The sector has dropped 12.69 percent while the Index has risen 8.3 percent. What most investors don’t realize, however, is that refiners can zig while the rest of energy zags. That may be the case with Phillips, because Wall Street’s consensus forecast is for its earnings per share to pop 53 percent this year and 43 percent the next.
Up Next: Investing Advice for Retirees
Stock data was sourced from Yahoo Finance and was accurate as of market close on July 21, 2017. Paul Meeks is a financial journalist and equity analyst. His investment advice does not reflect the views of GOBankingRates.
About the Author
In addition to being a financial journalist for decades, Paul has been an equity (stocks) analyst or portfolio manager at marquee firms. For Merrill Lynch Investment Managers (since acquired by BlackRock), he started and managed the world’s largest technology mutual funds franchise with $8 billion invested. Paul has taught Personal Finance and Investments courses since 2005.