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3 Dividend Stocks to Bankroll Your Retirement

By Jennifer Saibil - Mar 24, 2021 at 6:15AM

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Dividends are a great way to keep income flowing when you're finished working.

Beginner investors often see the stock market as a glamorous way to make a lot of money. But seasoned investors know that dividend stocks can be very valuable, even if they're value stocks that are past their high-growth stages.

Dividend stocks are particularly useful for retirees, because they provide income. Dividends stocks can bankroll your retirement if you've saved up a nest egg, have an emergency fund, and have paid off all your debts. For example, if you invest $100,000 in a stock with a 3% dividend yield, you'll get $3,000 annually. That's a lot better than most savings accounts. 

Realty Income (O 1.72%), PepsiCo (PEP 0.33%), and Kimberly-Clark (KMB 0.30%) are all excellent companies whose dividends yield more than 3%, and you can be confident in their future ability to pay out.

Strip mall with retail stores and some cars in parking lot.

Image source: Getty Images.

The monthly dividend company

Realty Income has an impressively high dividend yield of 4.6%. It also has the special feature of paying dividends monthly, and it has paid a dividend consecutively for 608 months, including raising it for 94 consecutive quarters.

The company is a real estate investment trust (REIT), which means it has to pay out most of its earnings as dividends. 

Realty Income owns more than 6,500 properties in 49 states plus Puerto Rico and the U.K., and it weathered the pandemic because its tenants are mostly essentials retailers, such as Walmart and Home Depot, which thrived over the past year. Other retail REITs that rent to apparel retailers and other non-essential stores had a challenging year. Realty collected 94% of rent in the fourth quarter and has 98% occupancy. The main detractors during the pandemic were tenants in the theater industry, such as AMC Entertainment Holdings, one of its top 20 clients, which shut down during the pandemic. But revenue increased throughout the pandemic, and 2020 earnings per share (EPS) were $1.14.

If you're looking for a great dividend company with a high yield and the potential for long-term viability, Realty Income is a great option.

A group of women drinking cola and eating snacks.

Image source: Getty Images.

Growth potential and a high yield

PepsiCo outpaced rival Coca-Cola during the pandemic with its non-beverage categories that were big winners while people were at home. The Quaker breakfast brand saw revenue rise 8% during the fourth quarter ended Dec. 26, 2020, and Frito-Lay snack sales increased 6%, leading to a 9% total sales rise and $1.33 EPS. International was strong as well in the fourth quarter, with a 53% sales increase in Africa, the Middle East, and South Asia, and a 34% increase in Asia Pacific, Australia, New Zealand, and China. 

As people begin to get out again, PepsiCo's sales should increase accordingly. It's focused on increasing market share for its banner brands, but it's also investing in new brands that fit today's culture and sensibilities, such as SmartFood and PopCorners, which lean toward healthy ingredients.

PepsiCo's dividend yields 3%, and it has raised it for 48 straight years, which means it will reach Dividend King status in two years, as long as the raises continue.

A woman wearing a coat and hat wiping her nose with a tissue.

Image source: Getty Images.

Toilet paper and more

If you hoarded toilet paper during the pandemic or were out of luck because there was none on the shelves, then you know Kimberly-Clark makes essential products that will never go out of style.

The company makes many of the best-selling paper and hygiene brands, such as Kleenex tissues, Cottonelle toilet paper, and Huggies diapers. Five of these brands each make more than $1 billion in annual sales alone.

Kimberly-Clark had unusually high growth at the beginning of the pandemic due to hoarding, and it's still steadily increasing.

KMB Net Income (Annual) Chart

KMB Net Income (Annual) data by YCharts

Sales increased 6% in the fourth quarter, and the tissue category was still strong with a 14% rise. Management expects sales to grow between 4% and 6% in 2021 and net income to rise slightly.

Kimberly-Clark just raised its dividend for the 49th consecutive year, making it one year away from becoming a Dividend King. It yields 3.3%, and investors have every reason to be confident that it will keep increasing.

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Stocks Mentioned

Realty Income Corporation Stock Quote
Realty Income Corporation
O
$69.24 (1.72%) $1.17
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$127.50 (1.19%) $1.50
Pepsico, Inc. Stock Quote
Pepsico, Inc.
PEP
$170.67 (0.33%) $0.56
Kimberly-Clark Corporation Stock Quote
Kimberly-Clark Corporation
KMB
$132.81 (0.30%) $0.40
The Coca-Cola Company Stock Quote
The Coca-Cola Company
KO
$64.31 (0.02%) $0.01
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
HD
$305.90 (1.02%) $3.09
AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$13.10 (7.07%) $0.86

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

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