Are you at or near retirement? Then you're likely hunting for dividend stocks as a way to combine steady income with a chance at market-beating stock price appreciation.
We asked Motley Fool investors to name a few attractive dividend investment candidates that are especially suitable for retirees. Read on to find out why they chose Walgreen Boots Alliance (WBA +0.00%), Johnson & Johnson (JNJ 0.89%), and Verizon (VZ 0.51%).
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Dependable growth
Jeremy Bowman (Walgreen Boots Alliance): Retirees want a dividend stock they can count on in tough times, but also one that will provide solid returns, both in share price and dividend increases.
Walgreen Boots Alliance fits this bill perfectly. The company, which resulted from the 2014 merger of Walgreen and the British chains Boots, is the largest retail pharmacy chain in the world. Operating in the drugstore business, Walgreen Boots offers exposure to the growing healthcare and pharmaceutical sector, which should provide an underlying tailwind for its business, and as Americans demand more convenience, the retail segment of the business is likely to fare better than its brick-and-mortar peers.
Thanks to an aggressive acquisition strategy, Walgreen should continue to deliver growth over the coming years. In June, the company said it would take over more than 2,000 stores from Rite Aid, a compromise from its original plan to buy the No. 3 drugstore chain in the country.
A dividend that isn't going anywhere
Travis Hoium (Verizon): If there's one bill I pay willingly every month, it's my Verizon bill. The nation's largest wireless provider has a network that reaches nearly every home in the country and has speeds that match, or more often exceed, competitors. And the fact that a world of information is always in my pocket is one of the great wonders of the world today.
For investors, Verizon has staked out a leading position in telecommunications with one of the best networks and balance sheets in the industry (only AT&T can really compete). And it's providing a service people feel like they need to have and aren't going to give up, or compromise quality on, for the foreseeable future. That dynamic has led to the strong earnings, cash flow, and dividends you see below.
VZ Net Income (TTM) data by YCharts.
What excites me about this stock is the foundation it's built on and the growth potential for the future. At the least, investors are getting a 4.8% dividend yield, which is nice cash flow for any retiree. But Verizon is also building out its 5G network, which will bring speeds up to 10 GB/second, enabling new technologies like self-driving cars or mobile VR. And that should lead to a new explosion of connected devices.
The foundation of a solid dividend and the ability grow as 5G launches will be a big benefit for Verizon shareholders long term. And it makes the company a great stock for retirees.
To your health
Demitri Kalogeropoulos (Johnson & Johnson): Given the choice, most retirees will opt for dependable profit generation over the potential for big share price gains. After all, with a shorter investing time horizon ahead, you have less flexibility to let a risky investment thesis play out over years or decades.
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That's why Johnson & Johnson makes a great option for those at or near retirement. The healthcare titan has one of the most diverse and profitable businesses on the stock market, with a collection of 250 businesses touching every aspect of the industry. It has been a winner for long-term investors, but its short-term results are also impressive. Revenue improved by 3% last year as earnings reached a record $16.5 billion -- up 8% over the prior year.
The Dow giant's steadily positive momentum has carried through into 2017. In fact, a 3% jump in organic sales last quarter convinced management to raise both its top- and bottom-line forecasts.
Executives are forecasting accelerating sales growth over the next two quarters, which might contribute to additional stock price gains. Looking further out, investors can expect a packed pharmaceutical pipeline to lead the operations higher and take pressure off of a relatively weak consumer products business. Johnson & Johnson is sure to have down years ahead, as it has in the past (revenue has declined in 3 of the last 10 fiscal years). But shareholders are likely to continue collecting increasing dividend payments, given that the company hasn't missed a payout boost in 55 years.
