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3 Dividend Stocks That Are Perfect for Retirement

By Keith Speights - Apr 4, 2021 at 6:01AM

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Steady and growing dividends plus strong businesses make these stocks excellent picks for retirees.

Most retirees will want to stay far away from "meme stocks." Such stocks skyrocket due to online hype rather than their underlying business performance. Their gains could easily evaporate, leaving your retirement account in shambles.

Retired investors are much better off going with the stocks of strong companies that pay solid dividends. Here are three dividend stocks that are perfect for retirement.

Smiling older couple walking side by side

Image source: Getty Images.

AbbVie

To qualify as a Dividend King, a member of the S&P 500 must increase its dividend for 50 consecutive years. AbbVie (ABBV -0.44%) is only one dividend hike away from moving into this highest echelon of dividend royalty. The big drugmaker has raised its dividend for 49 consecutive years, which qualifies AbbVie as a Dividend Aristocrat.

Retirees should love AbbVie's strong dividend track record. They'll also really like its juicy dividend yield, currently at 4.8%. But AbbVie offers more than just a great dividend program: The company is set to deliver solid long-term growth as well.

That growth will take a temporary pause in 2023 when AbbVie's top-selling drug Humira loses U.S. patent exclusivity. However, AbbVie expects to quickly return to modest growth the next year. The company projects high single-digit-percentage annual revenue growth for the rest of the decade.

Many pharmaceutical companies aren't able to handle loss of exclusivity for their top products so well. AbbVie, though, has been preparing for Humira's sunset for quite a while. It already has two autoimmune disease drugs on the market ready to take the baton from Humira. The company also has several other products that should drive growth.

Brookfield Renewable Partners

Brookfield Renewable Partners' (BEP 3.25%) current dividend yield of 4.6% isn't too far behind AbbVie's. The renewable energy company expects to grow its distributions by between 5% and 9% annually over the long term. Since 2000, Brookfield Renewable's distribution has increased by a compound annual growth rate of 6%.

The company shouldn't have any problems sustaining its momentum. Countries and major companies across the world are turning to renewable power to reduce their carbon emissions due to concerns about climate change.

Brookfield Renewable's hydroelectric power facilities generate more than 80% of its funds from operations (FFO). However, the company continues to move more into wind and solar power -- a smart move since wind and solar are now the cheapest sources of bulk energy generation.

Just how much can Brookfield Renewable grow? The company's capacity currently stands at 19,000 megawatts; it has a development pipeline that will add another 23,000 megawatts. Retirees should be able to sleep peacefully knowing that Brookfield Renewable will keep those distributions coming for years to come.

Johnson & Johnson

While AbbVie isn't a Dividend King just yet, Johnson & Johnson (JNJ 0.42%) has been a member of the elite group for nearly a decade. The healthcare giant has increased its dividend for an impressive 58 consecutive years. J&J's dividend is yielding close to 2.5%.

Retirees prize Johnson & Johnson's stability. The company has been in business since 1886, and it's survived and thrived during economic recessions and depressions, world wars, and global pandemics. Part of J&J's stability stems from its diversification across healthcare. The company operates three multibillion-dollar business segments -- consumer health, medical devices, and pharmaceuticals.

Sure, the company might not deliver jaw-dropping growth. However, J&J isn't shy about using its financial strength to make acquisitions and invest in research and development so it remains highly competitive in all of its markets.

One great example of J&J's commitment to R&D is its COVID-19 vaccine. U.S. Emergency Use Authorization of the vaccine in March was big news, in large part because it was the first to require only a single dose. Although the company is selling the vaccine at cost during the pandemic, it could be a significant moneymaker for J&J in the future.

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Stocks Mentioned

Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$178.82 (0.42%) $0.74
AbbVie Inc. Stock Quote
AbbVie Inc.
ABBV
$154.78 (-0.44%) $0.69
Brookfield Renewable Partners L.P. Stock Quote
Brookfield Renewable Partners L.P.
BEP
$34.66 (3.25%) $1.09

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

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