3 Dividend Stocks That Should Be Part of Your Retirement Plan

A recent survey by Nationwide, the financial services firm, found that over three-quarters of both Gen Z and millennials expect they will need to continue working into their retirement years because they do not believe Social Security will be enough to rely on in their old age.

It's a troubling situation, but the good news is that if you invest in dividend stocks, they can help strengthen your prospects for retirement. Not only can these types of investments increase the value of your portfolio over time, but they will also provide you with recurring cash flow.

Three dividend stocks that can be excellent investments to include as part of your retirement plan now are UnitedHealth Group (UNH 0.30%), Verizon Communications (VZ 1.17%), and ExxonMobil (XOM -2.78%).

1. UnitedHealth Group

One of the largest healthcare companies in the world, UnitedHealth is a highly profitable business that is both continually growing and offers an attractive dividend. Last week, the health insurer posted strong quarterly results, with revenue of $92.4 billion for the period ending Sept. 30 growing 14% year over year. Operating earnings of $8.5 billion were a solid 9% of the top line, which is consistent with the company's previous results.

With UnitedHealth, investors are getting some excellent stability and earnings power. The leading health insurance company can get bigger simply as the population grows and there is a greater need for ongoing healthcare. That makes it an ideal investment to hold for the long haul.

Plus, UnitedHealth pays a decent dividend yield of 1.3%. That's only slightly less than the S&P 500 average of 1.6%. But one way that this is better than your average dividend stock is the growth it offers.

UnitedHealth has been aggressively increasing its payouts in recent years. Over the past 10 years, the quarterly dividend has grown from $0.28 in 2013 to $1.88 now -- or nearly sevenfold. That averages out to a compound annual growth rate of 21%. Its most recent increase was a 14% boost to the dividend. And with a payout ratio of around 30%, there's still ample room for UnitedHealth to continue raising its dividend in the future.

Overall, this is an excellent stock to hold and it trades at a very reasonable 19 times its estimated future earnings.

2. Verizon Communications

Perhaps one of the best deals out there for dividend investors today is Verizon. The telecom giant is an industry leader and it generates great profits.

However, investors appear to be overly bearish on the company due to rising interest rates and concerns about potential liabilities related to lead-covered cables. The latter is an issue that may take years to sort out and any financial impact will be spread out as well. And as for the former, the business's strong financials have been able to weather the storm thus far, and there's little doubt that they'll be able to continue to do so.

Telecom companies have lots of assets and that can also mean plenty of debt on their books. That's not great as interest rates go higher, but Verizon remains highly profitable. It posted $7.2 billion in operating income for the most recent quarter (which ended in June) -- that's well over 5 times the interest cost it incurred during the period ($1.3 billion). Rising interest rates are a concern for Verizon's business, but they also aren't likely to last for the long term.

Buying this stock while other investors are pessimistic about its short-term outlook can set you up for some potentially attractive gains over the long term. Verizon's payout ratio remains around 50% of its profits, which provides investors with a bit of a buffer should things get worse. And last month, it raised its dividend for a 17th consecutive year.

The stock is trading at a forward price-to-earnings (P/E) multiple of only 6 because much of the risk relating to Verizon's business is already priced into its current valuation. At 8.7%, this is one of the highest yields you'll find for such a strong business. Although the near-term outlook may be concerning, Verizon can still make for an excellent long-term investment.

3. ExxonMobil

Another solid dividend stock to add to your portfolio is ExxonMobil. The oil and gas stock yields 3.3% and it has also been raising its payouts for years. Last year, the company increased its dividend by a relatively modest $0.03, extending its streak of increases to 40 consecutive years.

While the pandemic did interrupt its operations, Exxon's financial strength enabled the company to keep the streak going. And now, with oil prices higher, the business is in much better shape; Exxon's payout ratio is under 30%.

Earlier this month, the company announced plans to merge with Pioneer Natural Resources in an all-stock deal. Pioneer has a strong footprint in the Permian Basin, which is a key part of Exxon's growth; it accounted for over half of its oil and gas output last year. Through the deal, Exxon believes it can improve its cost structure while also producing more in the Permian. 

Better production and lower costs should be great news for the prospects of more dividend increases for investors. Trading at a forward P/E of only 10, Exxon is another cheap dividend stock to buy now and hold onto for years.