Next year will bring plenty of exciting investment opportunities, but sometimes shopping for quality dividend yields will be more beneficial to growing your retirement nest egg. Today we share three stocks that our analysts think are solid dividends to fuel your retirement.
Matt DiLallo: ConocoPhillips (COP -0.12%) is one of the best oil companies for a retirement account in my opinion. The independent oil and gas giant has the three characteristics I look for in a long-term holding. It has a solid growth plan, a steadily rising dividend, and a product or service that isn't likely to be replaced in the next few years.
At just under 4%, ConocoPhillips' dividend is pretty compelling. The company sees its dividend as its highest-priority use of its cash flow as it enhances capital discipline and provides its investors with a more predictable return. ConocoPhillips just raised the payout 4.5% last quarter and is targeting consistent increases in the future. That steadily rising dividend will go a long way to fueling the retirement of many Americans.
The reason ConocoPhillips can consistently grow its payout is that it has a solid plan to grow its business. The current plan will see it grow its oil and gas production as well as its margins by 3%-5% annually through 2017. The focus on more profitable growth means ConocoPhillips will have more income available to fund its already generous dividend.
Finally, as an oil and gas company, ConocoPhillips' main product isn't about to be innovated away anytime soon. Sure, renewables will supply a growing amount of our future energy needs, but even the sunniest estimates show that renewables won't overtake oil and gas anytime soon. That means investors can rest on the idea that ConocoPhillips will still be pumping oil and gas out of the ground for years to come. Bottom line: ConocoPhillips is a perfect dividend stock to hold for a long time in a retirement account.
Neha Chamaria: Fertilizer giant PotashCorp (POT) tops my list of dividend stocks you should consider for your retirement account. The name may have surprised you, given the uncertainty caused by the sudden collapse of the Uralkali-Belaruskali cartel earlier this year. But while the event was historical, its effect may not last long.
Fertilizers are responsible for nearly 50% of the world's food production, with potash, nitrogen, and phosphate counting as the three most important nutrients. As the world's largest potash producer, with 20% global capacity, and the third-largest producer of both nitrogen and phosphate, PotashCorp will be a key beneficiary as the world demands greater food. And as PotashCorp grows, investors can safely expect greater dividends. In fact, the stage is already set for some huge shareholder returns.
The major expansion program that PotashCorp started nearly a decade back is nearing completion. Those investments should start paying off now, while reduced capital requirement going forward should free up greater amounts of cash, which will likely go into shareholders' pockets.
PotashCorp's cash from operation at $3.4 billion for the past 12 months is almost at its 10-year high, having grown a staggering 800% since 2004. Meanwhile, its debt-to-equity ratio of 36% is close to its 10-year low. That's a killer combination, indicating how strong PotashCorp financially is.
For investors, it's the perfect recipe for potentially solid dividends, and even share buybacks, in the years to come. PotashCorp's dividend has grown a whopping 950% in just the past three years, and the stock already leads the industry with 4.3% dividend yield. PotashCorp should let you sleep well in retirement.
Maxx Chatsko: One of the biggest surprises for energy investors in 2013 was the resiliency of the world's nuclear power industry. There are localized cases where new construction doesn't make economic sense, but there are many more profitable examples that don't make the headlines. While nuclear powerhouse Exelon (EXC -0.17%) made headlines earlier this year for cutting its dividend and warning that nuclear was losing its competiveness in the marketplace, events haven't quite deteriorated to that level nor should they for the foreseeable future.
What made for such a dismal announcement earlier this year? Most of Exelon's nuclear capacity is stationed in the nation's Midwest, which also happens to be home to most of the country's wind capacity. I explained earlier this year how the production tax credit, or PTC, for wind energy has led to negative energy prices for consumers in parts of the country. Unfortunately, nuclear operators cannot switch off production with the ease of natural gas or coal-fired generating facilities, which means they pay to produce power. Luckily, negative energy prices are mostly relegated to off-peak hours, thus reducing the impact on nuclear power.
Considering that Exelon provides 20% of the nation's nuclear capacity and generates 55% of its electricity from nuclear, a competitive energy marketplace is within its best interests -- an issue management has continued to raise awareness for. Therefore, I wouldn't worry too much about the viability of the company's business or profitability. The recent merger with Constellation Energy will ease concerns regarding the company's competitiveness and lead to increased generation efficiencies. With its shares hovering near 10-year lows and the dividend sitting near 4.5%, I think investors can safely buy now and laugh their way to long term gains.
