Dividend-paying stocks can provide excellent options for older investors looking to build steady income streams as they head into retirement. While such companies tend to not be great candidates to become 10-baggers in the next decade when it comes to stock price appreciation, they can provide solid returns many have the potential to double your cost basis within 10 years. That might not seem like a great return, but it can be precisely what a retiree needs, and investing in these stocks also reduces the level of unnecessary risk in a portfolio.
Here are three dividend-paying stocks that could double your money in under 10 years, either through price appreciation, dividend growth, or both.
1. Electronic Arts
Electronic Arts (EA 0.79%) is one of the largest video game publishers in the world. It has dominated the sports video game market for decades with franchises including FIFA Soccer and Madden NFL. Both of those video games have virtual monopolies in the markets for their respective sports, and they produce steady profits each and every year.
But this is not all EA does. Through its various gaming studios acquired over the years, it has cultivated multiple hit franchises beyond the sports gaming niche. These include games like Apex Legends, Star Wars Jedi: Fallen Order, and The Sims.
With its diversification across multiple genres, EA has been able to ride the steady growth of the video game industry over the last few decades. As you can see from the chart below, its free cash flow per share -- the true measure of profitability for any business -- has climbed dramatically since the late 1990s. With all this excess cash, management started in late 2020 to pay out dividends to shareholders. Currently, its payout yields an admittedly low 0.6% annually. But the dividend is just getting started and EA has plenty of room to grow its payouts as its cash generation grows over the next 10 years.
EA Dividend Per Share (TTM) data by YCharts
2. Hershey
The Hershey Co. (HSY 0.57%) products have become ubiquitous with living in the U.S. and most people have experienced one at least once in their life. From its namesake chocolate bars to Reese's Peanut Butter Cups to Twizzlers licorice to Skinny Pop popcorn, Hershey's owns some of the most popular snack brands in the world, and its brand power has contributed to its steady growth and stable profitability over the decades.
Just look at this chart (below) outlining the growth of Hershey's free cash flow per share and dividend per share since the 1990s. Free cash flow per share is up a whopping 8,870% while the dividend is up 1,680%. Through incremental price increases and smart acquisitions, I think Hershey will be able to keep up this steady growth over the next 10 years, leading to strong shareholder returns. It also trades at a reasonable valuation and sports a dividend yield of 1.64% at the current share price.
HSY Dividend Per Share (TTM) data by YCharts
3. PepsiCo
Like Hershey, food conglomerate PepsiCo (PEP 3.62%) owns a portfolio of snack food brands including Lays, Quaker Oats, and Sun Chips. But through Gatorade, Lipton Tea, and of course, its namesake soda brands, among others, it also has a large presence in the drink market. It's one of the largest businesses in the world, with a market cap of $240 billion as of this writing.
PepsiCo has seen steady growth in profitability over the last few decades, with free cash flow per share up 673% since the 1990s. Management has used this cash generation to grow its dividend, which now yields an impressive 2.56% annually. The stock's dividend per share has steadily risen over the last decade as Pepsi has grown and acquired new brands.
If you believe people are going to continue buying Pepsi's various and varied food and beverage brands, PepsiCo's business should do well over the next 10 years. This makes the stock an easy buy for investors looking for a nice dividend payer in their retirement portfolio.
