Earning a high dividend yield and preserving your initial investment is a difficult combination. Stocks that offer higher returns often fall into a risky segment of the market where it is difficult to predict the future growth of the company.
That said, there are still a number of attractive investment opportunities that pop up from time to time for investors looking to extract reasonable cash flows from their stock portfolios. With this theme in mind, we've shortlisted three stocks to keep in your retirement portfolio.
1. BCE
Yield: 5.3%
Quarterly Payout: $0.6975
Market Capitalization: $46.05 billion
Canada's largest telecom operator, BCE (NYSE:) offers an attractive income opportunity for retirees.
Telecom companies underperformed during the pandemic as they struggled to gain more subscribers at a time when most employees were working from home.
The slow pandemic period that put pressure on BCE stocks seems to be over. The stock is up more than 20% this year after the company reported solid results. Adjusted net income rose to $751 million, up 31% from the same period last year.
With improving net income, BCE's balance sheet remains strong, with $5.3 billion in available liquidity at the end of the second quarter, including $1.75 billion in cash and cash equivalents.
BCE has long had a policy of increasing the dividend by 5% annually, which is enough to beat inflation. The company pays out between 65% and 75% of its free cash flow in payouts, more than doubling its annual payout since the fourth quarter of 2008.
2. Chevron
Yield: 5.47%
Quarterly Payout: $1.34
Market Capitalization: $189.4 Billion
Investors looking for a higher dividend yield may also want to consider the US oil giant Chevron (NYSE:). The California-based integrated energy, chemicals and petroleum company is benefiting from higher commodity prices and tight spending.
Another strength that sets Chevron apart from its rivals: the company entered the pandemic with a strong financial position, with a low debt burden, suggesting that it will need to save less money for its debt service.
At 22.4%, Chevron has the lowest debt ratio of its Big Oil peers, including Exxon Mobil (NYSE:) and British Petroleum (NYSE:).
Of the major oil producers, Chevron is in a strong position to return more money to investors after a year of tightening the belt and addressing the slowdown caused by the pandemic. That bullish outlook makes the stock attractive to investors looking to generate passive income through dividends.
In its latest update in July, Chevron told investors it is relaunching its share repurchase program starting this quarter, aiming to return between $2 billion and $3 billion a year to investors.
Chevron's buyback program comes on top of a dividend hike earlier this year, when it became the only western oil giant to lift its payout above pre-pandemic levels.
3. Simon Property Group
Revenue: 4.63%
Quarterly Payout: $1.5
Market Capitalization: $42.53 Billion
Of the three high-yield contenders, Simon Property Group (NYSE:) is perhaps the hardest choice to make. The COVID-19 pandemic has drastically reduced people's visits to their favorite shopping plazas, putting the long-term viability of businesses operating shopping malls at risk.
But the latest evidence suggests there is a huge pent-up demand for shopping in brick-and-mortar stores. According to data analytics firm Placer.ai, quoted in a Wall Street Journal report, July pedestrian traffic surpassed 2019 levels for the first time since the start of the pandemic.
Simon Property Group Weekly Chart.
David Simon, the group's chief executive officer, said in a statement last month:
"We are encouraged by the increase in our customer traffic, retailer sales and our leasing business. Based on our results to date and expectations for the remainder of 2021, we are again raising our full year 2021 expectations and we are raising our quarterly dividend again.”
As the largest US shopping center operator recovers from the pandemic-induced slump, its stock is up more than 50% this year, demonstrating investor confidence in the company's future.
