Dividend stocks can be a great way for retirees to generate passive income to supplement other sources like Social Security and pensions. The best ones are those that consistently increase their payouts, which helps a retiree cover their rising expenses.

Three stocks that appear poised to pay a steadily growing dividend are retail REIT Agree Realty (NYSE:ADC), clean power producer Clearway Energy (NYSE:CWEN)(NYSE:CWEN.A), and utility Xcel Energy (NASDAQ:XEL). That makes them perfect options for retirees.

A money bag with the word dividends written on it.

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Focused on the right kind of retail real estate

Agree Realty owns real estate leased to retailers. While that industry is facing some headwinds from e-commerce, Agree Realty concentrates on properties leased to essential retailers like home improvement stores, grocery stores, convenience stores, and pharmacies that aren't likely to face online competition. Further, it primarily leases space to retailers with investment-grade credit ratings, implying they have the strength to meet their financial obligations during an economic downturn.

The REIT complements that durable portfolio with a strong financial profile. It has an investment-grade credit rating and a conservative dividend payout ratio. As a result, Agree Realty's 3.7%-yielding dividend, which it pays monthly, is on solid ground. Meanwhile, the company has the financial flexibility to continue acquiring retail properties. It invested a record $1.3 billion in retail real estate last year and plans to purchase up to $1 billion of additional properties in 2021. That should supply the REIT with a growing income stream to support steady dividend growth.

A fully charged dividend

Clearway Energy operates wind, solar, and natural gas power generating facilities. It sells the power these assets produce to end-users like utilities under long-term power purchase agreements. That enables the company to generate relatively steady income to cover its 4.9%-yielding dividend.

Clearway complements its stable cash flow with a solid financial profile. That gives it the flexibility to invest in expanding its portfolio. The company lined up several investment opportunities over the past few months, which should give it the power to increase its dividend at a 5% to 8% yearly rate for the foreseeable future. Meanwhile, it has a strategic relationship with a renewable energy project developer, which should provide plenty of additional growth opportunities in the coming years to support further dividend increases.

Stacks of coins with wind turbines and solar panels in the background.

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Changing power sources

Xcel Energy distributes electricity and natural gas to millions of customers across the Midwestern part of the country. While fossil fuels are currently its primary power contributor, the utility is switching to cleaner energy sources. It has a bold strategy to achieve net-zero carbon emissions by 2050.

That plan is not only good for the environment but should pay big dividends for Xcel Energy's investors. The utility expects to invest more than $24 billion through 2025 on this strategy, which should support annual earnings growth of 5% to 7% per share. That should give Xcel the power to grow its 2.9%-yielding dividend at a similar rate. Further supporting that plan is Xcel's strong financial profile, including a conservative dividend payout ratio and investment-grade balance sheet.

Ideal dividends for retirees

Agree Realty, Clearway Energy, and Xcel Energy pay dividends with above-average yields, which will help retirees generate passive income to supplement their other sources. However, what makes this trio even better is that they expect their payouts to steadily rise in the coming years. That combination of yield and growth makes them perfect options for retirees since it will help them offset expense growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.