Investing in income-producing stocks is an ideal strategy for those who want to earn extra money during retirement. Of course, shares that pay dividends are not sexy, and the shares alone will not make you rich, but they often belong to a mature group of companies in stable markets that do not stop returning cash to investors, often by encouraging dividends, even during the worst economic times.
The big challenge, however, is to identify the right stocks. One way is to focus on high-quality companies in the with at least 25-year dividend growth, known in the market as "Dividend Aristocrats." Although good historical performance does not guarantee that companies in this group will continue to offer you money flows, this is still a much safer bet than choosing names without a track record.
The dividend shares below are two examples that we are worth considering as additions to your retirement portfolio:
1. 3M: ATM for long-term investors
The shares of one of & # 39; the world's largest industrial conglomerates, 3M (NYSE :), are by no means a buy if your investment goal is to see quick returns and move on to the next growth stocks. The future prospects for this industrial giant are uncertain among the many powerful headwinds that threaten the global economy, and a long-term economic weakness has the potential to harm demand for its products
But what if all you want is to earn steadily growing income? Based on this criterion, the maker of Post-it notes and touch screens has an excellent track record. The company increased its dividend every year between 1962 and 2018. This impressive dividend growth suggests that the company has the power to withstand recessions, weakness in demand and other turbulence along the way.
Trading at around $ 212 per share at the end of yesterday's 3 million shares fell by around 17% from the record level achieved in January last year with regard to rising costs and a slowing global economy will reach his profit. But this temporary slip also makes it possible for long-term investors to hold the dividend yield of almost 3% and to receive growing distributions year after year. The company will pay a quarterly dividend of $ 1.44 per share on March 12, an increase of nearly 6% over the $ 1.36 per share paid in the same period in 2018.
2. Procter & Gamble: owner of powerful consumer brands
Procter & Gamble (NYSE :), the maker of Crest toothpaste, Tide detergent and Bounty paper towels alongside other well-known consumer brands, has one thing in common with 3M: the unique ability to produce recurring cash flows from their large number Brands. Regardless of the economic cycle, companies such as P&G will continue to sell toothpaste and detergent and generate money for its investors. & # 39; The world's largest consumer products company is also one of the largest dividend payers in the industry.
The maker of Dawn dishwashing detergent and Pampers has increased his dividend for 62 consecutive years. In the past 128 years it has never stopped paying dividends, making money during recessions, wars and droughts. With a current dividend yield of 2.98%, the P&G shares pay around $ 0.72 per share each quarter. This remarkable history of payouts makes this consumer base a reliable source of passive income for pension portfolios.
The shares closed 0.3% yesterday against $ 104.66, but they have risen by nearly 34% in the last 12 months, 28% in the last 5 years. Unsustainable consumer shares, such as P&G, may not always produce the explosive gains in some growth stocks, but if you keep them in your cash-generating portfolio, you no longer have to worry about daily market volatility. Once you have bought them, you do not sell them, but you sit back and watch how they get a regular dividend income.
Procter & Gamble's weekly chart
Bottom Line
It is not difficult to generate a steady stream of passive income in your retirement if you start saving early and use part of these savings to buy reliable income shares, such as 3M and P & G. Stanford researchers The Center on Longevity project concludes that in order to retire at the age of 65 and to maintain your standard of living, you must put 10% -17% of your current income in a pension account. And that is if you start saving at the age of 25. As the years pass and you continue to reinvest dividends into your income portfolio, you will realize how quickly your nest egg grows, generating significant monthly cash flows for your business.
