A proven way to secure growing income during your golden years is to buy quality stocks with dividend growth.
Companies that increase their cash payouts quarter after quarter demonstrate that they can generate stable and reliable income for their investors, not only in good times, but also during recessions and recessions.
Dividend growth stocks also offer a good way to beat inflation. Unlike bonds that pay fixed principal and interest, these companies offer a regular pay rise in the form of dividends to increase your purchasing power. You can use that money to reinvest and buy more shares or to cover your monthly expenses.
Below we have compiled a list of three such stocks that can be trusted to earn a steadily growing income. Their dividend yields are undoubtedly low right now, as their stock prices have risen over the past year, but they are low-risk, high-quality names suitable for a long-term retirement portfolio.
1. Lowe's
5-year average dividend growth: 16.5%
Dividend Yield: 1.2%
Payout ratio: 26%
The home improvement giant, Lowe's (NYSE:) is one of the best dividend growth stocks for income investors.
The No. 2 home seller in the US, experiencing it since the pandemic outbreak, pushing home workers to spend more money in their homes.
This trend is likely to continue as many companies look for a hybrid work model that will allow more employees to remain flexible. This, coupled with low interest rates and the massive savings Americans have amassed during the pandemic, point to continued gains for home improvement stocks.
Lowe's weekly chart.
Lowe's currently pays $0.8 a quarterly dividend, which has grown an average of 16.5% per year for the past five years. That kind of growth is likely to continue. The company has a sustainable, low payout ratio of 26%, giving the retailer ample room to return more cash to its shareholders.
2. CN track
5-year average dividend growth: 12.8%
Dividend Yield: 1.84%
Payout ratio: 49%
Canada's largest rail company, Canadian National Railway (NYSE:) is another solid candidate to earn growing dividend income. What makes CNR attractive is that this railroad enjoys a unique competitive advantage within the North American economy.
CNR operates a 19,600-mile rail network spanning Canada and Central America, connecting the Atlantic, Pacific, and Gulf of Mexico. This broad economic moat makes CNR a stock that has the power to defend its business as it continues to run.
This combination of growth and income is hard to come by, as most income stocks have passed their growth phase; the main reason investors love them is the regular income stream.
CN Weekly overview.
But in the case of CN Rail, the network is still in the midst of a massive expansion caused by huge demand for its services. As part of its growth plans, CN Rail is in the process of acquiring US-based Kansas City Southern (NYSE:). The merger, if approved by regulators, will create the first rail network spanning the US, Mexico and Canada.
CN Rail pays $0.51 per share each quarter, which has grown at an average annual rate of about 13% for the past five years.
3. McDonald's
5-year average dividend growth: 8%
Dividend Yield: 2.18%
Payout ratio: 74%
Among global fast food chains, McDonald's (NYSE:) has a solid track record of consistently rewarding investors. The company has increased its payout every year since 1976, when it first began paying dividends.
McDonald's has many of the qualities retirees look for in high-income stocks: the company has a global competitive advantage over rivals, a solid recurring revenue model, and a great history of compensating its investors.
After weathering the pandemic, when lockdowns hurt its restaurant operations, the company is quickly regaining its . In April, it raised its global sales outlook for 2021, saying it expects U.S. sales in the current quarter to surpass pre-pandemic levels.
McDonald's Weekly Chart.
MCD pays quarterly dividends of $1.29 per share. That translates into an annual dividend yield of 2.18% at the current share price. With a manageable payout ratio of 74%, the company is in a strong position to continue delivering dividend growth going forward.
