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4 Dividend Stocks to Bankroll Your Retirement

By Leo Sun - Jun 9, 2020 at 6:03AM

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Seagate and three other dividend stalwarts can shield your portfolio from the incoming macro headwinds.

The trade war, COVID-19, and the unrest across America have recently caused many companies to slash or suspend their dividends to preserve cash. That trend is troubling for retirees who rely on stable dividend income, but there are still plenty of reliable dividend stocks that can bankroll retirement with minimal risk.

Here are three stocks that fit the bill: Seagate Technology (STX), General Mills (GIS -0.47%), Verizon (VZ 0.91%), and Philip Morris International (PM 1.77%).

A piggy bank next to stacks of coins a blocks spelling out "2020".

Image source: Getty Images.

1. Seagate Technology

Seagate shares a near-duopoly in the traditional HDD (hard disk drive) market with Western Digital. But unlike WD, which has aggressively diversified into flash-based SSDs (solid state drives), Seagate still mainly sells older HDDs.

HDDs face tough competition from SSDs, which are smaller, faster, more power-efficient, and less prone to damage. But to offset that slowdown, Seagate pivoted away from the lower-capacity consumer device market and boosted its capacities for enterprise and data center customers.

Wall Street expects Seagate's revenue and earnings to rise 2% and 5%, respectively, this year, as the increased usage of cloud-based and streaming services (especially throughout the pandemic) bolsters demand for its HDDs.

Seagate raised its dividend for the first time in four years last year, and currently pays a forward yield of 4.8%. That dividend is easily sustainable, since it consumed just 59% of the company's free cash flow (FCF) over the past 12 months.

2. General Mills

General Mills sells a wide range of packaged foods, including Cheerios, Haagen-Dazs, and Yoplait. Like many of its industry peers, General Mills struggled with a consumer shift toward healthier foods and competition from private-label brands.

To offset that slowdown, General Mills acquired healthier brands like organic food maker Annie's, expanded into the premium pet food market by buying Blue Buffalo, and refreshed its aging brands with new varieties like Blueberry Cheerios and Yoplait Go-GURT. It also raised its prices to offset lower shipment volumes.

Analysts expect General Mills' revenue and earnings to rise 4% and 10%, respectively, this year, partly due to COVID-induced shopping. That growth could cool off next year as it faces tougher year-over-year comparisons.

General Mills froze its dividend hikes and buybacks two years ago to conserve its cash after buying Blue Buffalo, but it still pays a generous forward yield of 3.2%. It's paid uninterrupted dividends for 120 straight years, and it probably won't break that streak anytime soon.

3. Verizon

Verizon is one of the largest wireless carriers in the United States. But unlike its top rival AT&T, Verizon isn't trying to integrate a massive media business, as AT&T is desperately trying to do with Time Warner.

Verizon's acquisitions of AOL and Yahoo's internet businesses weren't well conceived, since they largely failed to plant the seeds for a competitive media and advertising business, but the resilience of Verizon's core wireless business should offset those missteps over the long term.

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Image source: Getty Images.

Verizon's revenue is expected to drop 4% this year with a 1% earnings dip, but the temporary COVID-19 headwinds should wane next year. Its growth could also be amplified by the launch of new 5G handsets later this year.

Verizon has raised its dividend annually for 15 straight years. It spent just 57% of its FCF on that payout over the past 12 months -- which gives it plenty of room for future hikes.

4. Philip Morris International

Philip Morris International is one of the world's largest publicly traded tobacco companies. It was spun off from Altria in 2008, and it's raised its dividend every year since the split. PMI and Altria both sell cigarette brands like Marlboro, but PMI only does business overseas.

Like Altria, PMI has struggled with declining smoking rates over the past few decades. However, PMI offsets those declines with price hikes, focuses on developing markets with higher smoking rates, and cuts costs to protect its earnings and dividends. It's also selling more iQOS devices, which electronically heat tobacco sticks instead of burning them, as alternative smoking devices.

PMI's revenue and earnings are expected to decline 4% and 6%, respectively, this year, as COVID-19 disrupts its duty-free and iQOS sales channels. PMI currently pays a forward yield of 6.2%, and its dividend consumed 78% of its FCF over the past 12 months.

Get paid with these four stocks

Seagate, General Mills, Verizon, and Philip Morris International won't generate jaw-dropping growth anytime soon. However, investors looking for safe high-yielding stocks in this turbulent market should accumulate shares of these dividend stalwarts.


Leo Sun owns shares of AT&T. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$45.56 (0.91%) $0.41
Philip Morris International Inc. Stock Quote
Philip Morris International Inc.
$101.00 (1.77%) $1.76
General Mills, Inc. Stock Quote
General Mills, Inc.
$76.64 (-0.47%) $0.36
Seagate Technology plc Stock Quote
Seagate Technology plc

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