As you build an investment portfolio for your golden years, it makes sense to buy some quality, dividend-paying stocks that offer both predictable income and long-term growth potential. One challenge that beginners face is how to distinguish such companies.
One way to achieve the goal of passive income is to focus on the Dividend Aristocrats Index, which includes many companies that have increased their dividends for at least 25 consecutive years.
A dividend track record of more than a quarter of a century is a solid indicator that these companies can generate stable, reliable income for their investors, not only in good times, but also during recessions and recessions.
Here we have compiled a list of three dividend stocks from this group to give you an idea of ??their strength and how you can use their examples to find other similar candidates for your portfolio.
1. Objective
The main concern to address when choosing a dividend stock for a retirement portfolio is whether the company is able to generate strong cash flows in both good and bad times. Minneapolis-based retailer Target (NYSE 🙂 certainly fits the bill.
Target Weekly Chart.
The company has been steadily increasing its dividend every year for the past 49 years, a period that includes crises such as the dot-com collapse in the early 2000s, the 2008-2009 financial crash and the COVID-19 pandemic from the past. year. While the discount chain provides cash to investors every quarter, it also maintains a very conservative payout ratio of about 22%, a level below the industry average.
That strength comes from Chief Executive Officer Brian Cornell's efforts to make Target's retail outlets more attractive. He led the remodeling of hundreds of stores, introduced many affordable fashion brands and enhanced the retailer's e-commerce offering. During the pandemic, Target used its stores more as mini-distribution centers for its fast-growing digital business to better handle online orders.
In a release this month, Target said comparable sales – those from stores and digital channels operating for at least 12 months – were up 23% from a year earlier. The growth rate was twice as high as in the same quarter last year.
Target pays $ 0.68 a share quarterly with an annual dividend yield of 1.21%. Payout has increased by more than 6% every year for the past five years.
2. Abbott Laboratories
Like retailers, health care stocks can also provide a regular and growing income stream for retirees. Healthcare providers offer services that remain necessary even during a recession. Moreover, economic fluctuations do not usually slow the introduction of new medicines and medical devices.
In this space, we love Abbott Laboratories (NYSE :), a global manufacturer of medical devices, generics and nutritional products. The Illinois-based company has paid dividends every year for nearly half a century, making it a solid name in your portfolio.
During the pandemic, Abbott saw its diagnostic sales flourish after it invented BinaxNOW, an over-the-counter testing device for the COVID-19 virus. The device brought in $ 2.2 billion in revenue this year.
Abbott Laboratories Weekly Chart.
Even after the COVID pandemic is under control, the growth prospects for Abbott Labs are bright. The company has a diversified portfolio from glucose meters to surgical instruments. Demand for such products is ongoing, generating consistent free cash flows and dividend income for investors.
Shares of Abbott are weakened about 3% this year, closing at $ 116.75 on Wednesday. Still, the healthcare provider has achieved impressive returns over the past five years, with a 200% profit including dividends.
The company pays a quarterly dividend of $ 0.45 per share with an annual dividend yield of 1.52%. Payout has increased by more than 8% every year for the past five years.
3. McDonald's
Some health-conscious consumers may not like McDonald's (NYSE 🙂 for its fast food menu, but stocks of this global restaurant chain offer a healthy way to to bring in steadily growing dividends. The company has increased its payout every year since 1976, when it first started paying dividends.
McDonald & # 39; s has many qualities that retirees look for in high-income stocks: the company has a global competitive advantage over rivals, a solid recurring model and a long history of offsetting its investors.
After struggling through the pandemic, when lockdowns hurt restaurant operations, the company is rapidly regaining sales momentum. Last month, it raised its 2021 global sales outlook and said it expects US sales to surpass pre-pandemic levels during the current quarter.
MCD pays quarterly dividends of $ 1.29 per share. That translates to an annual dividend yield of 2.2% at the current stock price. With a manageable payout ratio of 73%, the company is in a strong position to continue to deliver dividend growth going forward.
