It's never too late to start saving for retirement. But if you are just starting to invest for your golden years, the biggest challenge you will face is how to build a portfolio that will support you well enough when you start your after-work life.
Over the past decade, interest rates have remained low, depriving savers of low-risk investment opportunities. The return on the example is now less than 1%.
The reality in this consistently low interest rate environment is that retirees need to tie a large portion of their portfolios to equities to achieve higher total returns. Conservative investors who don't want to add too much risk to their portfolios will need to identify good quality stocks that have the ability to recover from downturns while still generating regular income.
We've selected three dividend stocks worth revising that have in the past outperformed inflation and delivered reasonable returns in the long run.
1. Verizon Communications
Telecom operators are reliable income producers for retirees. Whatever direction the economy takes, the Internet and wireless connections will be among the last items consumers are removing from their must-have lists. This predictability and determination increase their appeal to long-term investors.
In this space, Verizon Communications (NYSE 🙂 is a good choice for retirees. The company has a solid track record of rewarding investors with dividends, which have grown since 2007. The company increased its quarterly dividend by 2% last year, bringing its quarterly payout to $ 0.615 per share.
At the current stock price of $ 58.99, as of Monday's close, that translates to an annual return of about 4.2%.
Telecommunications may not generate hefty capital gains, such as those from more volatile, high-flying technology stocks, but downside risk in times of emergency is also limited.
As with other companies in all industries, the coronavirus pandemic and the shutdown of the US economy have added a layer of uncertainty to Verizon. However, there are reasons to expect Verizon to be one of the companies that weather the storm better than most.
Rather than building its balance sheet with mega deals, Verizon has focused on improving its infrastructure. The company has avoided the major entertainment acquisitions pursued by peers like AT&T (NYSE :).
2. Target
The main concern to address when choosing a dividend stock that will earn retirement income is whether the company is able to generate strong cash flows when the economy struggles and consumers are limiting their spending.
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On this measure, one of the largest retailers in the US, Target (NYSE :), fits the bill. Its extensive network of stores, immense power to pressure its suppliers and rapidly improving online sales give it safe haven status.
The greatest evidence of this strength came during the early months of the COVID-19 pandemic, when millions of Americans stocked up on food and household items. During that time, Target's digital sales grew by a whopping 141% as the Minneapolis-based retailer met consumer needs, from stock food to baby clothes.
In the three months to May 2, Target & # 39; s rose 10.8% from a year earlier, driven by e-commerce. Digital sales accelerated during the quarter, increasing 282% in April alone. In addition, more than 5 million customers shopped at Target.com for the first time.
Target increased its June quarterly dividend to $ 0.68 a share, the 49th consecutive year of payout increases. With a dividend of 2.2% from yesterday's closing price of $ 132.94, the big-box retailer offers investors both returns and the promise of growth.
3. Duke Energy
Energy and gas companies are among the best choices for retirees because of their tendency to increase their dividends consistently. In this space, Duke Energy (NYSE 🙂 is an attractive option. Through its diversified electricity, gas and storage businesses, Duke plans to deliver between 4% and 6% annual dividend growth.
The utility is well positioned to reward its long-term investors following a major restructuring of its portfolio in recent years. The turmoil included selling carbon-based energy resources and foreign operations, buying a utility company, and expanding the reach in renewable energy.
Owning Duke stock makes sense to retirees because the regulated business models make cash flows predictable, meaning there is little risk of negative surprises. The company has a $ 37 billion development plan running through 2022 to support the company's inflationary dividend growth.
The latest version of the utility, released yesterday, also showed that the company is weathering the pandemic-induced downturn quite well.
"Despite the challenges of the first half of 2020, we have shown resilience and agility, delivered solid second quarter results and on track to meet our financial commitments for 2020," said Lynn Good, chairman Duke Energy, president and CEO, said in a statement.
The stock, with an annual dividend yield of 4.46%, pays a quarterly dividend of $ 0.965 per share. It closed at $ 84.76 on Monday.
