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3 Safe Retirement Stocks To Earn Sustainable, Growing Dividends

Published 2022-01-12, 03:10 a/m

For many investors aiming to save for retirement, keeping track of daily market gyrations simply doesn’t make sense. Rather, a more effective investment style is to buy quality stocks, then hold them and receive regular dividend income.

If the goal is to build a solid cash stream for retirement, a major market correction could provide an opportunity to buy good retirement stocks more cheaply. Good retirement stocks pay dividends no matter what’s happening with the general economy. Their payouts survive peaks and troughs, wars, depressions, and asset bubbles.

These companies’ products and services are so crucial that we can’t imagine a normal life without them. This quality has turned these businesses into cash machines that never run out.

Here are our three top picks to consider adding to portfolios—especially when markets are going through a correction phase which can further extend stock values, making them more attractive:

1. Procter & Gamble

Consumer staple giant Procter & Gamble (NYSE:PG) has proven to be a great stock for long-term investors. The company has increased its dividends for 65 consecutive years, a track record that's very hard to match.

This consistent dividend history also shows the power of the company’s cash-flow generation. Its range of products, including such globally recognized brands as Pampers diapers, Tide laundry detergent, and Charmin toilet paper, is strong enough to sustain revenue growth through wars, recessions and market downturns.

With the steadily growing payouts, P&G has also provided capital growth to its investors. The value of its shares almost doubled during the past five years.

Procter & Gamble Weekly Chart

P&G stock, which closed yesterday at $158.66, currently yields 2.14%. That yield may not seem exciting if you’re looking to earn a higher return on your investment, but given its track record, Cincinnati-based P&G is a reliable dividend stock in both good and bad times. It currently pays $0.87 a share quarterly dividend.

The strength of P&G’s consumer brands has been evident during the current health crisis as well. The consumer staples giant has been among the few companies that have maintained their full-year earnings guidance throughout the pandemic, benefiting from the increased buying of cleaning products.

P&G’s consistent growth and long dividend history make its stock an ideal addition to any retirement portfolio.

2. Lowe’s

The home-improvement giant Lowe’s (NYSE:LOW) is another safe retirement stock that we recommend for buy-and-hold investors.

The No. 2 home improvement retailer has outperformed the broader market during the past one year, benefiting from the stay-at-home environment that prompted many Americans to put more money into their homes. After surging more than 50% during the past year, LOW shares closed yesterday at $249.50.

Lowe's Weekly Chart

Analysts expect this trend to continue as we see more people moving out of big cities and heading to the less crowded suburbs as work from home becomes a norm after the pandemic.

This de-urbanization, low-interest rates, and the massive savings that Americans have accumulated during the pandemic indicate continued gains for home improvement stocks.

Along with impressive capital gains, LOW has also been growing its payouts regularly—far exceeding the inflation rate. During the past five years, Lowe’s average dividend per share growth rate has been about 17%. The company currently pays $0.8 a share quarterly dividend which translates to a 1.2% annual yield.

3. Enbridge 

For buy-and-hold investors, we like utilities for one simple reason: these companies invest billions of dollars to build assets that generate solid income for their investors. As long as customers continue to pay their utility bills, the cash will keep rolling in.

In this space, we particularly like Calgary, Canada-based Enbridge (NYSE:ENB), which is North America’s largest gas and oil pipeline operator. The company operates across North America, moving nearly two-thirds of Canada’s crude oil exports to the U.S. It also transports about 20% of the natural gas consumed in the U.S. and operates North America’s third-largest natural gas utility by consumer count.

Enbridge Weekly Chart

ENB, whose shares closed at $41.34 on Tuesday, has an impressive track record when it comes to paying dividends. It has increased dividends at an annual rate of 10% over the past 27 years. Currently, the utility has a rich annual dividend yield of about 6.6%, which translates into a quarterly payout of $0.6725 per share.

The company forecasts it will increase distributable cash flows (DCF) between 5% and 7% through 2023. It also expects to pay between 60% and 70% of its DCF as dividends, making the payouts sustainable.

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