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3 Dividend Stocks That Can Help You Retire Early

By David Jagielski - Jun 23, 2021 at 9:13AM

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They have all been consistently raising their payouts for more than a decade.

The pandemic has interrupted not just people's lives but also their retirement plans. A study from Edward Jones and Age Wave recently found that one in three Americans are now planning to delay retirement because of the impact COVID-19 has had on them. Unexpected expenses were also cited as one of the biggest concerns for retirees.

One way to improve your financial position and your prospects for early retirement is by investing in dividend stocks. Companies that steadily pay dividends generally have stable businesses, and they can deliver not just recurring income but also capital gains as they rise in value. Three stocks worth considering for your portfolio today -- each of which has an excellent track record for paying and increasing dividends -- are Cardinal Health ( CAH 2.05% )McDonald's ( MCD 1.89% ), and Comcast ( CMCSA 4.93% )

A couple reviewing a statement.

Image source: Getty Images.

1. Cardinal Health

Cardinal Health is a Dividend Aristocrat, meaning it has been increasing its dividend payments for decades. This year, you could expect to earn $1.96 per share just from owning the healthcare stock. That's a yield of 3.4%, which is well above the S&P 500 average of only 1.4%. What's great about the business is how stable it is; over its past three quarters, sales of $120 billion are up a modest 3% from the prior-year period. And while that might sound boring to growth-oriented investors, it's the type of consistency that dividend lovers adore. 

The only thing I don't like about the company, which distributes pharmaceuticals and makes products that are used in labs and for surgery, is that its margins aren't terribly high. At 2% or lower, there isn't much room for error for the business to stay in the black. However, given the volume the company enjoys, that's still sufficient to support its dividend -- its payout ratio is still very sustainable at 50%. 

With baby boomers retiring and an ever greater need for healthcare in the future, it wouldn't be a bad move to hold Cardinal Health in your portfolio.

2. McDonald's

McDonald's is also a Dividend Aristocrat, meaning payouts are standard with this fast-food giant. Its stock yields 2.3%, another above-average payout. My favorite aspect of the company's business is its ability to adapt to changing tastes. Not only does it offer unique items in different parts of the world, but over time it has changed its menu to offer healthier options. The most recent example of that came in February with the news that it was working on developing more plant-based products, including partnering with Beyond Meat under a three-year strategic agreement.

Although the past year has been volatile for restaurants due to the pandemic, McDonald's is already showing strong signs of recovery. In the first-quarter results it released April 29, its comparable sales were up 13.6% in the U.S. (compared with 0.1% a year ago) for the period ending March 31. Overall, sales were up 7.5%, versus a decline of 3.4% in the same period in 2020.

The restaurant chain has been successful for decades, and with a profit margin of 26% over the trailing 12 months, it has done well even during some challenging circumstances. Given better times ahead, the business will only get stronger. Its payout ratio of 73% is higher than Cardinal Health's, but it's still a manageable percentage that shouldn't raise any alarms. For long-term income investors, McDonald's is a safe stock that you should be able to count on for many years for its recurring cash flow.

3. Comcast

Although Comcast has been raising its payouts for more than a decade, it is the only stock on this list that isn't a Dividend Aristocrat. However, with a yield of 1.7%, it still offers investors a slightly better payout than what you would get with the average investment in the S&P 500.

The media and telecom company has been a household name for decades and looks to be a safe bet to remain that way. An advantage it has over both McDonald's and Cardinal Health is that its operations are more diversified. From the company's Universal theme parks to its media and cable operations, there are a lot of different growth opportunities for the business. And while that can mean a greater need for cash and thus a smaller payout, it can make the company more stable over the long run.

Comcast's theme park business, for example, took a big hit in 2020, with sales of $1.8 billion down 69% from the previous year because of lockdowns during the pandemic. But thanks to growth in other areas -- and the fact that theme parks don't make up a significant piece of its business, comprising less than 6% of revenue in 2019 -- Comcast's top line nonetheless totaled $104 billion in 2020, down just 5% year over year.

Comcast's payout ratio of just 36% is the healthiest of the stocks listed here. With the economy poised for a strong year in 2021, it wouldn't be surprising to see Comcast report a stellar performance as its parks open back up -- potentially leading to a generous bump up in its dividend, as there's definitely plenty of room there to support some significant increases. This is another buy-and-forget stock that can help get you to retirement a little bit sooner.

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.

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Stocks Mentioned

Cardinal Health, Inc. Stock Quote
Cardinal Health, Inc.
CAH
$46.81 (2.05%) $0.94
McDonald's Corporation Stock Quote
McDonald's Corporation
MCD
$248.80 (1.89%) $4.62
Comcast Corporation Stock Quote
Comcast Corporation
CMCSA
$51.50 (4.93%) $2.42

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

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