Retirees, looking for reliable income from their investment portfolios, have to contend with bloody bond yields during the pandemic amid simple monetary policies and unprecedented support from central banks.
It is hovering around 1.6% today, up from less than 1% in early 2021 and only 0.31% during the March 2020 market turmoil. Some of the most aggressive forecasters are not seeing rates rise above 2 , 5% before the end of this year.
Supporting the consensus that the low interest rate environment is unlikely to change anytime soon are governments around the world who continue to work to revive their economies following the devastating impact of the COVID-19 pandemic on businesses and personal finances.
In hopelessly low interest rates, it makes sense for retirees to resort to quality dividend stocks that offer payouts that beat other asset classes. Below we have shortlisted two such stocks to help retirees earn higher incomes:
1. IBM
Many investors do not have a favorable view of International Business Machines (NYSE 🙂 due to poor growth performance over the past decade.
The 109-year-old tech giant was slow to restructure its business at a time when demand for its big-frame servers and other hardware was plummeting and its customers began to store data on cloud services provided by rivals such as Amazon (NASDAQ 🙂 and Microsoft (NASDAQ :).
But there are some clear signs that the company is succeeding in its recovery efforts, making the 5% dividend yield attractive to long-term investors. New York-based IBM posted the largest revenue increase in 11 quarters this week, fueled by demand for its cloud services.
IBM Weekly Chart.
Arvind Krishna, who took over as CEO from Ginni Rometty last April, is turning to artificial intelligence and the cloud to revive growth. Krishna has reorganized the company's operations around a hybrid cloud strategy, which allows customers to store data on private servers and on multiple public clouds.
Krishna said he is “confident” that IBM will see sales growth in the second quarter and the remainder of the year. "We will leave 2021 in a stronger position than we started," he said during a conference call after the results were announced.
IBM is, in our opinion, a safe dividend stock that can earn higher income, especially after the marked shift from new management to cloud computing. These steps are encouraging and could unlock the value of IBM stock, which has been raising its dividends for 25 consecutive years.
At Tuesday's close, trading at $ 138.16, IBM will pay a quarterly dividend of $ 1.63 per share.
2. General Mills
Consumer goods offer another attractive option for retirees looking to earn steadily growing dividend income. They are considered safe because these companies are less tied to the economic cycle and tend to sell products that customers need regardless of the economic conditions.
For these reasons, we like General Mills (NYSE :), maker of Cheerios cereal, Yoplait yogurt, and Nature Valley granola bars among other staples, for long-term income portfolios.
With a price of $ 62.30 at last night's close, the stock is up about 21% in the past two years, and is unlikely to show much volatility, even if the market returns to a high level during the pandemic. take a dip. Another benefit of owning GIS shares is that investors receive a 3.3% return on the company's dividend, which compares favorably with today's extremely low bond yields. In addition, the Minneapolis-based company has been paying dividends continuously for the past 120 years.
Weekly chart from General Mills.
To stimulate growth in recent years, General Mills has sought to diversify its revenue base. In 2018, the company acquired the maker of Blue Buffalo pet food, the largest deal in 18 years. The acquisition added a new growth opportunity to the company's portfolio at a time when the traditional nutritional unit was under pressure as consumers quickly changed their eating habits in search of fresher, greener and less sugary foods.
GIS is a stock that is likely to underperform in a bull market, but it is a defensive name that will do better in a bear market.
Bottom Line
By adding solid dividend stocks to your retirement portfolio, you can create a sustainable income stream you can rely on. You should start building your income portfolio slowly when stock prices are attractive and yields are high. By following this strategy, you will continue to earn steadily growing payouts even when the economy is in bad shape. Stocks like IBM and General Mills are two suitable candidates for this strategy.
