Planning for retirement is no easy task, and finding investments that have the stability, growth, and dividends to pay you well into your retirement can be even more difficult to track down. But there are great companies out there that offer solid yields and are positioned for more growth for years to come.
Planning for the future while paying its investors
American Tower is a real estate investment trust (REIT) and one one of the biggest tower companies in the world. It may not be the typical income investment play, but the company's opportunity lies in the growth of wireless data usage both in the U.S. and abroad. American Tower estimates that over the next five years, data usage will grow at a compound annual growth rate of 25% to 30% in the U.S., and even faster internationally. The growth is being spurred on by the 20 billion Internet of Things devices that will come online by 2020 and the expansion of 5G wireless.
American Tower currently owns about 40,000 tower sites in the U.S. and more than 109,000 internationally, and it rents out space on the towers to wireless carriers. A typical deal with the company lasts 10 years, which means it locks in its customers for a long time and earns about 99% of its sales as recurring revenue.
American Tower pays a dividend of 2.1% right now and has raised it for 23 consecutive quarters. The company's yield isn't as high as those of other dividend stocks, but American Tower is a dividend growth play that has the potential not just to generate income for investors, but also outpace the market as well.
A more traditional dividend play with a long history of success
It's harder to find a more consistent dividend play than 3M. The company has been paying a dividend for 100 years and has increased its payment to investors for 60 consecutive years. 3M's yield is currently at 2.3%, which is decent, but when you add in the fact that its shares have outpaced the market over the past 10 years (and longer), this company starts to look really impressive.
3M sells a wide range of consumer and industrial products, everything from Scotch tape and Post-It notes to industrial adhesives, and it has about 60,000 products in its portfolio right now. In the most recent quarter, 3M grew its sales by 9% year over year, and when you take out the one-time tax charge from the recent tax law changes, the company's earnings per share grew 11.7%.
The core of 3M's future is its ability to find and develop new products that will earn it consistent revenue over the long haul, which is why the company's management expects about 6% of its sales to be continually funneled into R&D. 3M's slow-and-steady approach and pristine dividend history should appeal to any income investors looking for a company that understands the true meaning of long-term planning.
Choosing the right dividend stock is personal
I recognize that one, or even both, of these companies may not appeal to all investors that are looking for a great dividend stock. These are just two options out of sea of other great stocks in which to invest. But these two companies do offer their own unique angle on dividend investing, and each is positioning itself to outpace the market. Whether you choose 3M or American Tower to add your portfolio, or some other dividend play, be sure to create a comprehensive retirement strategy for your investments.
Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends American Tower. The Motley Fool has the following options: short April 2018 $130 calls on American Tower and long January 2019 $80 calls on American Tower. The Motley Fool recommends 3M. The Motley Fool has a disclosure policy.