Planning for retirement has never been so difficult. Pension plans are no longer as common as a few decades ago. Only 20% of Fortune 500 companies offered new employees a pension or defined benefit plan in 2015, compared to 59% in 1998, according to consulting firm Willis Towers Watson.
If you are one of the savers who only have to plan for retirement, then you will unfortunately not find many high-productive opportunities to earn a decent income stream. In the persistently low interest rate climate of the past decade, savings accounts pay almost nil, while the yield on government bonds is extremely low.
However, investing in dividend growth stocks offers a way to build wealth for your golden years. Companies that regularly offer dividend increases run mature companies that can provide stability and growth for your portfolio. In view of these benefits, we have selected three shares with dividend growth to consider.
1. Duke Energy
Energy and gas companies are one of the best choices for retirees due to their tendency to pay growing dividends. Duke Energy (NYSE 🙂 is an attractive option in this space. Due to its diversified power, gas and storage activities, Duke plans to achieve annual dividend growth of between 4% and 6%.
We believe that the utility company is well positioned to reward its long-term investors after a major restructuring of its portfolio in recent years. The shake-up included the sale of carbon-based energy sources and foreign operations, the purchase of a utility company and the expansion of its renewable energy reach.
Owning Duke shares makes sense for retirees because their regulated business models are predictable, meaning there is little chance of negative surprises. The company has a $ 37 billion development plan that runs until 2022 to support the company's dividend growth that beats inflation.
The stock has won nearly 13% in the last 12 months, 24% since 2014, so yesterday's session dropped 0.3% at $ 89.62 per share.
Over the past five years, Duke has achieved capital growth of around 25%, including dividends. Even with this profit, the dividend yield of 4.2% from the utility company is attractive enough to bet on these shares in the long term.
2. Apple Inc.
There are not many high-powered technology stocks that could satisfy the conservative income investor, whose goal is to generate steadily growing income and preserve capital. But the maker of popular iPhones, Apple Inc. (NASDAQ 🙂 is an exception.
Apple's high profit margins on devices such as the iPhone and iPad and services such as Apple Music make the company great for years to come. From the first quarter of this year, Apple had $ 245 billion in cash on hand, making it one of the most cash-rich companies in the world. Apple said last year that it plans to eventually reach a zero net cash position.
The shares, rising 6.8% in the last 12 months and a whopping 114% since 2014, have risen in the past two sessions and close yesterday at $ 203.23.
Don't be disappointed by Apple's current, small dividend yield of 1.5%. Apple offers a powerful combination to increase the total return for its investors in the form of rising dividends and a massive repurchase plan for own shares
In April, Apple increased its share buyback program by $ 75 billion and raised the quarterly dividend by 5% to $ 0.77 per share. During the past five years, Apple delivered the average dividend growth rate of 10.50% per year that was large enough to defeat inflation and provide a substantial passive income to pensioners.
3. Verizon Communications
Like electricity and gas companies, telecom companies are also great income producers. Regardless of the direction the economy is moving, internet and wireless connections are among the last items that consumers remove from their list of mandatory listings. This predictability and stickiness increase their income for long-term investors.
In this area, Verizon Communications (NYSE 🙂 is a good choice for retirees. The company has a solid reputation when it comes to rewarding investors with dividends growing since 2007. The company currently pays out $ 0.60 per quarter payout, which translates into an annual return of 4.3%.
CEO Hans Vestberg, who joined Verizon last summer after working for decades at network equipment maker Ericsson (BS :), lowers investment in high-risk areas such as media to fully focus on network expansion. Indeed, Verizon is leading the race to introduce the fifth generation or 5G technology and becoming the first courier to roll out 5G phones in parts of Chicago and Minneapolis.
The shares rose 1.1% yesterday, closing at $ 57.01, after rising 11% in the past year and 15% since 2014.
Telecom shares may not offer substantial capital gains, especially in comparison with fast-growing stocks. But these shares are defensive in nature and help retirees in times of economic need.
Bottom Line
Investors who seek to earn a steadily growing income to save for retirement will find that surrendering money into stable dividend growth stocks is not a bad idea. Pension donations can be built up slowly by adding qualitative income shares at the right time when they sell cheaply and offer good access points. The above shares would fit well in such an investment plan.
