5 Top Dividend Stocks for Retirees to Buy

Investors in or nearing retirement who are looking for additional income might consider buying stocks that pay dividends. Dividend-paying stocks can offer significant income potential, which is often important for retirees, particularly as interest rates remain at rock-bottom levels, which means retirees aren't getting much in interest income from bank products like certificates of deposit. In fact, according to Bankrate.com, the average 1-year CD yields just 0.97%. Savings accounts are even worse, providing just 0.54% annual interest on average.

As you can see, if you're an investor who needs your savings to generate income, taking your money to a bank won't help much. However, not all is lost. There are a good number of stocks in the consumer goods sector that pay solid dividend yields far and above what you'll typically get from a bank product. Here are five to get your research started.

Look to consumer goods for dividend income
The consumer goods sector encompasses a wide range of industries that provide discretionary or staple products that households consume on a regular basis. These include food and beverage companies, restaurants, retailers, and household products companies. Companies engaged in these businesses (at least the best among them) maintain low capital expenditure needs, and people use their products regularly.

This allows for more reliable profits, a portion of which companies can use to pay dividends to shareholders.

Here are some large-cap consumer goods stocks that have high dividends.

TTM = trailing 12 months.

Each of these companies holds a leadership position in its industry as well as a world-class brand. Their products are universally known and used by millions of people every day. P&G has a massive portfolio with several brands that each rake in billions of dollars every year, including Tide laundry detergent, Crest toothpaste, Bounty paper towels, and Gillette shaving products. Wal-Mart is the largest retailer in the world and operates more than 11,000 stores in 27 countries worldwide. PepsiCo owns a diverse food and beverage product lineup that includes its flagship Pepsi brand as well as Gatorade and Frito-Lay. Altria Group owns the Philip Morris USA cigarette brand. Lastly, McDonald's restaurants are world-famous; its golden arches require no introduction.

Because of their strong brands, all five of these companies are profitable enough to reward shareholders with dividend payments. This is reflected in the payout ratios listed in the table. This financial measure analyzes how much a company distributes to investors in dividends as a percentage of the profits generated by the business. The lower the ratio, the more flexibility a company has to pass along higher dividend increases down the road.

Five consumer goods dividend stocks for retirees to consider
This is a good list to begin your research because it includes a wide range of industries within the broad consumer staples sector. And these five stocks are a nice mix of lower-yielding stocks with higher dividend growth potential, along with higher-yielders that provide more income now. Plus, these five stocks hold long histories of raising their dividends every year thanks to their strong brands and high profitability.

When stocks raise their dividends, they provide investors with an important measure of protection. Inflation erodes the purchasing power of fixed-income products. A big advantage of owning dividend-paying stocks that increase their dividends every year is that investors see their purchasing power protected against the ravages of inflation. And let's not forget that the yields offered by each of these stocks handily beat the interest rates available on certificates of deposit and savings accounts.

P&G, Wal-Mart, PepsiCo, Altria, and McDonald's shouldn't be any investor's complete portfolio. Instead, they are a good starting point for highly profitable dividend stocks in the consumer goods sector. A balanced portfolio would include stocks from other industries as well. But as far as the consumer goods sector is concerned, this list is a great place for retirees to begin their research.