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3 Dividend Stocks Perfect for Retirement

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Keep the checks coming after you retire with these three promising industry giants.

The investing world rightly emphasizes the importance of saving enough money for retirement. But when you're done working for money, don't forget you still have years after your retire to let your money continue to work for you. After all, buying solid dividend stocks is arguably the best way to predictably generate wealth over the long term. 

So we asked three top Motley Fool investors to each pick a dividend stock that they think is perfect for retirement. Read on to learn why they chose Anheuser-Busch InBev (BUD 2.10%), Royal Dutch Shell (RDS.A) (RDS.B), and Johnson & Johnson (JNJ 1.13%).

Retired couple holding hands on a beach while watching the sunset


Cheers to the golden years

Steve Symington (Anheuser-Busch InBev): When you're enjoying retirement, you'll want to own secure, industry-leading stocks that let you sleep at night. With a healthy dividend yielding roughly 3.6% at today's prices, and a roughly 28% share of the global beer market following its $100 billion megamerger with SABMiller late last year, Anheuser-Busch InBev fits that bill perfectly. 

That's not to say AB InBev's financial results always taste perfectly sweet. Last quarter's performance was technically mixed relative to investors' expectations, with total volumes falling falling 1.2% year over year because of adverse weather in many parts of the United States. But the company's three primary "Global Brands" -- that is, Budweiser, Stellar Artois, and Corona -- helped offset those declines with particularly strong shipments in Mexico, Argentina, and Africa. And even then, the stock fell a mere 1% the following day as the market digested its minor disappointment -- a testament to the company's relative stability and global diversification.

AB InBev has also yet to fully realize the benefits of its merger. Last quarter, the company increased its goal for capturing cost synergies of $3.2 billion, up from $2.8 billion before, as it continues the integration with SABMiller. As of the end of last quarter, it had captured less than $1.5 billion of that target. 

I think AB InBev is an ideal portfolio candidate for retirees -- or any investor, for that matter -- willing to buy the stock, collect its dividend, and watch as it continues to dominate the global beer market.

Big and getting bigger

John Bromels (Royal Dutch Shell): I can't think of a stock more ideal for retirees than oil major Royal Dutch Shell. Its stellar dividend yield, combined with its solid fundamentals, offers the perfect combination of security and income.

With the price of oil on the rise, Shell's fortunes are continuously improving. The company's cost-cutting measures allowed it to turn a profit in the second quarter, with oil prices at about $50 a barrel. Its most recent third quarter -- during which Brent crude prices averaged about $52 a barrel, was nothing short of fantastic, with profit up 47% year over year, to $4.1 billion. 

The company's longer-term outlook is also upbeat. Shell has been divesting underperforming assets, with a goal of dropping some $30 billion in assets by 2018. Meanwhile, it has expanded its liquefied natural gas business, a market it expects will grow even faster than oil in coming years. That should help keep investors' money safe even if the oil market softens again. 

Last, but certainly not least, the company's current 5.7% dividend yield is among the best in the industry. Royal Dutch Shell is a stock that someone on a fixed income can feel safe buying and forgetting about. 

A healthy choice for retirees

Keith Speights (Johnson & Johnson): With healthcare generating nearly one-fifth of U.S. gross domestic product, it makes sense for retirees to have exposure to the sector in their investing portfolios. And the one stock that, by itself, gives the broadest diversification in healthcare, both in the U.S. and globally, is Johnson & Johnson. 

Johnson & Johnson consists of more than 230 companies. Its three business segments rank among the leading competitors in their respective markets. J&J's consumer segment markets household names, including Band-Aid bandages, Listerine, and Tylenol, and is on track to generate sales of around $14.5 billion in 2017. The medical devices segment sells surgical, cardiovascular disease, and specialty products, with revenue likely to top $26 billion this year. 

But J&J's biggest segment -- and the one driving the most growth for the company -- is its pharmaceutical business. The pharmaceutical segment's top products include autoimmune-disease drugs Remicade and Stelara, antipsychotic drug Invega, cancer drugs Imbruvica and Zytiga, and blood thinner Xarelto. J&J's pharmaceutical business should contribute close to $36 billion in revenue this year. With one of the best pipelines in the industry, sales should grow nicely in the years ahead. 

There's one other big plus for retirees with buying J&J stock over seeking other healthcare exposure: J&J's dividend currently yields 2.4%. The company has increased its dividend for 55 consecutive years. 

The bottom line

No stock is perfect for every investor. And we can't guarantee these three promising businesses will continue to beat the market for investors who buy today. But between their positions of industry leadership, stability, and generous capital returns, AB InBev, Royal Dutch Shell, and Johnson & Johnson come as close at it gets to meeting the unique demands of retirees looking to put their money to work. 

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Stocks Mentioned

Johnson & Johnson Stock Quote
Johnson & Johnson
$179.52 (1.13%) $2.01
Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
Anheuser-Busch InBev SA/NV Stock Quote
Anheuser-Busch InBev SA/NV
$55.08 (2.10%) $1.13
Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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