One thing that future or current retirees hate is too much volatility in their portfolios. The key is to obtain a collection of shares that ensure smooth, slow and gradual capital appreciation and a regular flow of income to cover the costs in the golden years.
So, investors who are just starting their economical journey and would like to build a nest egg should certainly consider some high-quality dividend shares to add to their portfolios. Companies with good management, strong balance sheets and dominant market positions are the best bets in this profession.
The following two dividend stocks were found to be solid income generators for pensioners; they belong to the group of stocks that can perform well in times of economic turmoil and in times of stability.
1. Merck
The reason why we love Merck & Company Inc (NYSE 🙂 for a pension portfolio is the defensive nature of the healthcare giant and the growing dividend. Just like retailers, utilities and telecom companies, healthcare providers offer services that we cannot afford to postpone in a recession and economic fluctuations do not usually determine the rollout of new medicines and devices.
The shares have reached almost 37% in the last 12 months and ended 0.2% on Friday with $ 81.17.
Merck, a global healthcare provider, has achieved many successes with the introduction of blockbuster drugs. Cancer treatment from Keytruda is the latest addition to its pipeline and sales are growing fast. Recent test results have made it a clear leader in the treatment of lung cancer and analysts expect it will generate nearly $ 12 billion in sales by 2022.
The company also has many other older drugs that continue to provide a solid flow of cash, particularly the vaccine segment that includes measles, mumps, and rubella immunizations. For a drug producer, spending on R&D is a matter of life and death. In October, the drug manufacturer said it plans to invest $ 16 billion in new capital projects until 2022, a jump of 33% over the year before.
With a strong profit moment, a large R&D budget and a growing dividend and buy-backs, we believe that Merck is a good long-term bet. Last year, Merck increased its dividend by 15% to $ 2.2 per share on an annual basis. This translates into an annual dividend yield of 2.7%.
2. Waste management
We create a lot of waste every day and someone has to take care of that waste, whether there is a recession or a boom. Waste Management Inc (NYSE :), based in California, is well positioned to turn our waste into cash for its long-term investors. The shares have increased by 33% in the last 12 months and ended the Friday session at $ 108.43.
Waste Management Wake Up Service
The company manages the largest network of landfills, transfer stations and recycling facilities in both the United States and Canada. The huge canal and huge cash generation mean a steady stream of income for pensioners for the coming years.
Last month, WM announced that its competitor will purchase Advanced Disposal Services Inc (NYSE 🙂 for approximately $ 2.9 billion, which the Wall Street Journal describes as one of the largest business unit acquisitions in more than a decade. The deal brings together the largest and fourth largest companies in the sector, further consolidating the competitive advantage of Waste Management in the industry
WM shares have proven to be a solid investment for long-term investors. Over the past decade, the company has more than doubled its annual distribution to shareholders. Today, WM shares pay an annual dividend of $ 2.05 per share, which translates into an annual dividend yield of 1.87%.
If the dividend was reinvested, investors made up around 150% of the total return in the last five years, which was considerably better than the profit of around 50%. It is difficult to predict whether WM will continue to offer a comparable payback time, but its leading position in the sector suggests that it is a relatively safe bet for long-term investors.
Bottom Line
Dividend shares, such as Merck and WM, are safe bets if you want to build up a portfolio that could offer you a stable passive income during your retirement years. These shares have the ability to outperform the broader market, even when it is in a deep correction, or during periods of economic recession. Diversifying your portfolio with defensive stocks that regularly pay dividends is always a good strategy for retirees.
