Imagine you've put in the work for decades, and you're finally nearing your golden years. You'll soon be retired, free to pursue your passions, spend time with loved ones, and be rewarded for a lifetime of smart financial decisions. Your nest egg will be your support system, financially supporting your wants and needs over the years to come. Ideally, your nest egg will generate passive income, so you don't need to sell your investments to live off of them.
Dividends can do this well. Mature, profitable companies with long track records of paying shareholders, and also increasing the amount they pay yearly, can be a strong foundation for any retirement portfolio.
Here are five fantastic dividend stocks that can pay you for the rest of your life -- without too much stress along the way.
1. Johnson & Johnson
Healthcare is a staple of the economy, and Johnson & Johnson (JNJ -0.46%) shows up throughout the industry. The healthcare conglomerate sells pharmaceutical drugs and medical devices. It recently spun off its consumer products business as Kenvue so it can better focus on growing its remaining business segments. The company is a legendary dividend payer; management has paid and raised its dividend annually for 61 consecutive years, making it a Dividend King.
The company's dividend has a manageable 73% dividend payout ratio, and Johnson & Johnson has arguably the best balance sheet on Wall Street. It's one of only two publicly traded companies with an AAA corporate credit rating -- that's higher than the U.S. government!
The stock yields 3% at the current share price, giving retirees a solid return on investment they can trust.
2. Apple
Almost every adult in the developed world uses smartphones, and the consumer electronics giant Apple (AAPL -0.35%) is the king. More than 1.3 billion people use iPhones, and Apple prints cash profits as people replace their devices and subscribe to various services like Music and News. Apple is relatively new to the dividend scene; the company has paid and raised its dividend for 11 years and has invested in famously large share repurchases ($85 billion last year alone).
Apple's dividend is an afterthought financially, with just a 15% payout ratio. The current dividend yield is 0.5%, which might not blow retirees away, but Apple's potential to grow the dividend over the coming years could add enough upside to a portfolio to help outpace inflation.
Apple is a Warren Buffett favorite, and Berkshire Hathaway's largest holding -- quite a vote of confidence.
3. Home Depot
Real estate is a multitrillion-dollar industry and a central piece of American culture. These two tailwinds have made The Home Depot (HD 0.94%) one of the world's largest retailers. The home improvement retailer has more than 2,300 stores across North America and sells materials, tools, appliances, and services to both homeowners and professional contractors.
Home Depot has increased its dividend for 14 consecutive years, and there seems to be more where that came from. The company has a dividend payout ratio of 60%, leaving lots of room for future raises. Additionally, the average home in America is nearly 40 years old, so future needs for remodeling should help support Home Depot's long-term business prospects.
The stock yields 2.8% at its current share price.
4. McDonald's
There isn't a more recognizable name in the fast-food game than McDonald's (MCD -0.91%). The company has been selling burgers and fries for decades, and its 38,000 locations are recognizable virtually worldwide.
McDonald's makes most of its profits by franchising its restaurants and collecting rent on the land. It also collects a percentage of sales.
People eat at McDonald's during both good and bad times, which has helped make McDonald's a durable business that has thrived for decades. Management has paid and raised the dividend for 48 consecutive years. The dividend payout ratio is 75%, which is manageable for a business that doesn't need much investment to maintain itself.
McDonald's converts a third of its revenue into cash profits. Retirees can score a 2.1% dividend yield at the current share price.
5. Procter & Gamble
Household staples are one of the most reliable businesses out there, and Procter & Gamble (PG -0.78%) is the goliath of households worldwide. Check your paper towels, shampoos, detergent, cleaning products, or diapers, and you'll probably see Procter & Gamble's name on the label. Consumers buy these products without thinking twice, a model that's worked for many years.
Procter & Gamble has one of Wall Street's longest dividend growth streaks, at 67 years. Additionally, the 73% dividend payout ratio and stellar balance sheet, leveraged at just 1.6 times earnings before interest, taxes, depreciation, and amortization (EBITDA), virtually ensure that shareholders will continue cashing those quarterly checks for years to come. The stock offers a solid 2.5% yield at the current share price, giving retirees peace of mind and passive income.
