If you're a retiree looking for a way to boost your income and offset the impact of inflation, there are some quality dividend stocks you should consider putting your money into today. Bristol Myers Squibb (BMY -0.87%), Cisco Systems (CSCO -0.27%), and McDonald's (MCD 1.70%) all pay better yields than the S&P 500 average of 1.6%. Their businesses are also profitable, so they can make for ideal stocks to buy for risk-averse investors.
1. Bristol Myers
Bristol Myers is a top drugmaker that investors can count on for long-term growth and dividend income. In its most recent quarter, for the period ended June 30, the company reported revenue of $11.9 billion that rose 2% year over year. In the U.S. market, it achieved revenue growth of 12%.
The company's continued innovation makes it a promising investment. Earlier this year, the U.S. Food and Drug Administration approved a new cancer treatment for advanced melanoma (which involves Opdualag and top-selling medicine Opdivo) that could generate $4 billion in annual revenue for the company at its peak.
Bristol Myers has consistently generated more than $11 billion in revenue in each of the past four quarters, and profits during that time have been 14% of sales. Those sound financials put the company in a great position to grow and pay its dividend, which yields 2.9% today. With a payout ratio of 70%, the yield looks safe and could help make the most of a retiree's savings. In five years, the company has raised its dividend payments by 38%.
Year to date, the healthcare stock has been soundly beating the markets, up 19% versus the 10% decline the S&P 500 has seen thus far.
2. Cisco Systems
An even higher-yielding stock that retirees might love is Cisco. At 3.3%, it pays more than double the S&P 500 average, and yet its payout ratio is right around 50%, suggesting that there could be room for the company to raise its dividend payments. And that's something that the tech company has been known to do, with its quarterly dividend rising by 31% over the past five years.
Cisco is known for its networking and security equipment, which can be essential at a time when more companies are digitalizing their businesses and are moving more of their operations onto the cloud. Like those of Bristol Myers, Cisco's numbers are normally fairly stable, at around $12 billion to $13 billion in quarterly revenue. And its profit margins are even higher, normally at more than 20% of sales.
However, as with many tech stocks, Cisco has been struggling this year, falling 27% since the start of 2022. And it could be a bargain buy right now, trading at a forward price-to-earnings multiple of just 13, which is far less than the 24 times future profits that the Technology Select Sector SPDR Fund averages today.
3. McDonald's
McDonald's pays the lowest yield on this list, at 2.1%. However, the popular fast-food chain is definitely one of the safest stocks that retirees can hold, especially amid inflation.
The business was able to raise prices in the U.S. this year while still generating comparable sales growth of 3.7% in its home market for the period ending June 30. Internationally, the company did even better, with its comparable sales rising by at least 13%. If not for the impact of foreign currencies, McDonald's top line would have been up by 3% (instead, it was down by that percentage).
Despite the challenges in the global economy this year relating to supply chain disruptions, rising prices, and the war in Ukraine, the company has managed to post impressive numbers. Over the trailing 12 months, McDonald's has netted a profit of $6.1 billion on sales of $23.6 billion, for a profit margin of just under 26%. And even if inflation becomes more problematic this year, the fast-food company and its relatively cheap menu items can be a more attractive alternative for consumers looking to eat out than more formal dining options.
McDonald's is a no-brainer type of investment to hang on to whether you're looking for safety this year, some stability over the long term, or just a quality dividend stock that you can count on for recurring income. McDonald's has increased its dividend payments for 45 years in a row and is the only Dividend Aristocrat on this list. Plus, its payout ratio sits below 70%.
