7 Great Dividend Stocks to Buy For a Comfortable Retirement

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There are people who will say the day of set it and forget it retirement accounts are over. But it’s a narrative we’ve heard before. The truth is the formula for saving for and enjoying a comfortable retirement, like the formula for weight loss, hasn’t really changed. A lot depends on whether an individual has the discipline to see it through.

Dividend stocks remain one of the core elements of a retirement portfolio. As individuals near retirement the ability to reinvest dividends allows for a greater total return. And once individuals need to live off their portfolio, the dividends provide a source of income without having to tap their principal.

However, not all dividend stocks are the same and many investors get sucked in by the allure of a high-yield dividend stock. But what you’re really looking for are companies with a history of increasing its dividend. The ability to increase a dividend over time illustrates that the company has a business model that can hold up regardless of how the broader economy is performing.

In this special presentation, we’ll highlight seven stocks that individuals can buy today to capture a stable, recurring dividend.

#1 - Procter & Gamble (NYSE:PG)

One of the best indicators of a strong dividend is a company’s history of increasing its payout. And Procter & Gamble (NYSE:PG) is among the best with a 59-year history of paying out a solid dividend.

This isn’t a stock that’s going to be confused with the high-flying growth stocks. However, during the pandemic, P&G proved its strength as a defensive stock when its products flew off supermarket shelves. That’s what investors are buying; a dividend stock that will be resilient in any economy, but particularly at times when the economy looks weak.

Investors could quibble about the company’s P/E ratio that is a bit elevated compared to its historical trend. However, as P/E stock has dropped from its 5-year high set late last year, the P/E ratio is drifting to be more in-line with its historical average. And currently, PG stock has a dividend yield of 2.49% and a payout ratio of 50.38%.

About Procter & Gamble

The Procter & Gamble Company provides branded consumer packaged goods worldwide. It operates through five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. The Beauty segment offers conditioners, shampoos, styling aids, and treatments under the Head & Shoulders, Herbal Essences, Pantene, and Rejoice brands; and antiperspirants and deodorants, personal cleansing, and skin care products under the Olay, Old Spice, Safeguard, Secret, and SK-II brands. Read More

Current Price: $155.88
Consensus Rating: Moderate Buy
Ratings Breakdown: 12 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $168.53 (8.1% Upside)

#2 - Pepsico (NASDAQ:PEP)

The Pepsico (NASDAQ:PEP) versus Coca-Cola (NYSE:KO) debate extends to more than just the taste of each company’s respective carbonated beverages. Battle lines are frequently drawn on the company’s stock.

The pandemic has tested the narrative that demand for the company’s products was a foregone conclusion. Consumers couldn’t pick up the slack from the demand that was lost due to the suspension of live events and the shuttering of bars and restaurants. That, however, plays to Pepsi’s favor because Pepsi has been growing its snack food division which gives them a “both/and” model that Coke can’t currently match.

Another reason why dividend investors should consider Pepsico stock is because of its payout ratio which at 58.66% is well below Coke which has a payout ratio in the 80% range. This simply means that Pepsi should have more flexibility to increase its dividend going forward.

Pepsi should be one of the winners as the economy begins to reopen and they can begin to generate revenue from traditional distribution channels. And with a nifty dividend to boot, Pepsi is a solid addition to this list.

About PepsiCo

PepsiCo, Inc engages in the manufacture, marketing, distribution, and sale of various beverages and convenient foods worldwide. The company operates through seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East and South Asia; and Asia Pacific, Australia and New Zealand and China Region. Read More

Current Price: $172.56
Consensus Rating: Moderate Buy
Ratings Breakdown: 6 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $186.92 (8.3% Upside)

#3 - Kimberly-Clark (NYSE:KMB)

You should consider Kimberly-Clark (NYSE:KMB) stock for many of the same reasons as Procter & Gamble. The company’s products are in high demand regardless of the state of the economy and the company has a safe, reliable dividend.

In the case of Kimberly-Clark, the company has increased its dividend for the last 49 years. If it makes it to 50 it will become part of a very select group of stocks known as Dividend Kings. The company also has a payout ratio of just 44.32% suggesting that there is much more room to grow its dividend.

KMB stock is down significantly from its all-time high which was set late last year. However, a key catalyst is likely to remain in place for some time to come.

An event like the Covid-19 pandemic leaves ripple effects that last for years, and sometimes indicate permanent behavioral shifts. Americans will likely continue to buy the products sanitary products. And that trend will be amplified in offices, schools, and other public venues.

About Kimberly-Clark

Kimberly-Clark Corporation, together with its subsidiaries, manufactures and markets personal care and consumer tissue products in the United States. It operates through three segments: Personal Care, Consumer Tissue, and K-C Professional. The company's Personal Care segment offers disposable diapers, training and youth pants, swimpants, baby wipes, feminine and incontinence care products, reusable underwear, and other related products under the Huggies, Pull-Ups, Little Swimmers, GoodNites, DryNites, Sweety, Kotex, U by Kotex, Intimus, Thinx, Poise, Depend, Plenitud, Softex, and other brand names. Read More

Current Price: $125.91
Consensus Rating: Hold
Ratings Breakdown: 3 Buy Ratings, 6 Hold Ratings, 3 Sell Ratings.
Consensus Price Target: $131.85 (4.7% Upside)

#4 - Cardinal Health (NYSE:CAH)

Health care will always be a strong sector, particularly if you’re a pharmaceutical distributor. The ability to help individuals manage chronic conditions transcends political ideology. And that’s one reason why Cardinal Health (NYSE:CAH) makes this list.

CAH stock struggled in 2020 due to its being named in a lawsuit brought by states that named Cardinal Health as a defendant for its role in the opioid epidemic. However, in late 2020, Cardinal Health along with other drug wholesalers reached a $26 billion settlement. That should decrease the uncertainty on the company’s balance sheet.

And this allows investors to focus on the company’s fundamentals. With a P/E ratio of just over 10, CAH stock is trading at a level that is significantly lower than where it was just a few years ago. And the company pays out a solid dividend that has a yield of 3.77%.

Cardinal has increased its dividend for the last 34 years and has a comfortable payout ratio of 24.28%.

About Cardinal Health

Cardinal Health, Inc operates as a healthcare services and products company in the United States, Canada, Europe, Asia, and internationally. It provides customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home. Read More

Current Price: $107.11
Consensus Rating: Moderate Buy
Ratings Breakdown: 7 Buy Ratings, 3 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $103.07 (3.8% Downside)

#5 - Automatic Data Processing (NASDAQ:ADP)

For investors that are nearing retirement, consistency is the name of the game. And that’s what investors get from Automatic Data Processing (NASDAQ:ADP). The company is the largest payroll processor in the United States. The company has competition from Paycom (NYSE:PAYC). However, the company still has a strong moat with small- and mid-size businesses. This is because of the flexible packages that ADP provides for its customers.

The company’s 2.15% dividend yield is pedestrian. But as dividend investors know, yield is not the best measure of a company’s dividend. ADP has increased its dividend for 47 years and has a payout ratio of 37.24% which is easily supported by the company’s recurring revenue.

That recurring revenue is also a reason that the company has managed a 100% increase in its stock price over the last five years. And ADP stock is up 57% since the onset of the pandemic. The company should also have a short-term catalyst as the economy begins to reopen and hiring increases.

About Automatic Data Processing

Automatic Data Processing, Inc provides cloud-based human capital management solutions worldwide. It operates in two segments, Employer Services and Professional Employer Organization (PEO). The Employer Services segment offers strategic, cloud-based platforms, and human resources (HR) outsourcing solutions. Read More

Current Price: $242.95
Consensus Rating: Hold
Ratings Breakdown: 2 Buy Ratings, 6 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $254.58 (4.8% Upside)

#6 - UPS (NYSE:UPS)

I can imagine you’re thinking that if I’m going to be pushing a stock that will benefit from the growth of e-commerce I should suggest Amazon (NASDAQ;AMZN). That’s a great choice. But AMZN stock doesn’t pay a dividend and that’s why UPS (NYSE:UPS) merits consideration.

UPS has an attractive, if not modest, yield of around 2.5%. However it’s the company’s payout ratio that is worth your attention. At around 39% it looks to have a lot of upside particularly considering the fact that demand for the company’s services is only going to increase in coming years. And despite the pandemic, UPS did manage to increase its dividend recently.

In fairness, FedEx (NYSE:FDX) has an attractive payout ratio as well. However, at this time UPS pays a higher yield.

Like many stocks on this list, UPS is not a stock for investors to buy with expectations of long-term growth. However, investors get a reliable dividend that provides income into and through their retirement years.

About United Parcel Service

United Parcel Service, Inc, a package delivery company, provides transportation and delivery, distribution, contract logistics, ocean freight, airfreight, customs brokerage, and insurance services. It operates through two segments, U.S. Domestic Package and International Package. The U.S. Domestic Package segment offers time-definite delivery of express letters, documents, small packages, and palletized freight through air and ground services in the United States. Read More

Current Price: $143.80
Consensus Rating: Hold
Ratings Breakdown: 8 Buy Ratings, 15 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $165.61 (15.2% Upside)

#7 - Walt Disney Company (NYSE:DIS)

The Walt Disney Company (NYSE:DIS) is the one company on this list that does not currently pay a dividend. Disney suspended its dividend as a countermeasure to weather the global pandemic. However, it’s likely that the company will restart their dividend when the company’s theme parks and production studios return to normal operating conditions. The company had a 40-year history of issuing a dividend with a payout ratio between 15% and 30%.

At the onset of the pandemic, Disney appeared to be a pandemic loser for obvious reasons. However, as time has gone on, the House of Mouse has proven that the whole of the company is greater than the sum of its parts. In this case, the company’s streaming service, Disney+, has helped it weather the lack of revenue from its theme parks, resorts, and cruise ships.

As the economy reopens, Disney looks to be one of the big winners. With that in mind, I would expect that investors can expect strong capital growth in 2021 and 2022. And for those investors with a medium to long-term retirement timeline, you should expect the company to reinstate its dividend.

About Walt Disney

The Walt Disney Company operates as an entertainment company worldwide. It operates through three segments: Entertainment, Sports, and Experiences. The company produces and distributes film and television video streaming content under the ABC Television Network, Disney, Freeform, FX, Fox, National Geographic, and Star brand television channels, as well as ABC television stations and A+E television networks; and produces original content under the ABC Signature, Disney Branded Television, FX Productions, Lucasfilm, Marvel, National Geographic Studios, Pixar, Searchlight Pictures, Twentieth Century Studios, 20th Television, and Walt Disney Pictures banners. Read More

Current Price: $111.75
Consensus Rating: Moderate Buy
Ratings Breakdown: 22 Buy Ratings, 2 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $124.54 (11.4% Upside)

The market is likely to remain volatile for quite some time. At this time, equities remain one of the only places to get a return on capital. But the risk tolerance of some workers may be changing.

A recent study found that many workers in their 50s are using the pandemic as an opportunity to take a step back from their career. The long-term effects of this are yet to be felt, but it’s likely that many individuals may be looking to accelerate their retirement plans.

This doesn’t mean individuals should look to exit stocks. But it may be time to become more selective, particularly for investors who believe a market correction may be coming. Quality, reliable dividend stocks are an ideal way to add diversification to a portfolio.

For investors that have some time, the opportunity to reinvest dividends for a higher total return now will be a source of stable cash in years to come.