Want to retire in the next decade? Excellent! Today, I'm revealing three dividend payers that will get you there safely and provide an ever-growing source of income after retirement. It's time your money started working for you, and I'm confident these picks will do just that.
Carefully seeking perfection
There are roughly 5,400 companies trading on major U.S. exchanges, 2,300 of which pay dividends. To find the best dividend stocks for retirees, I spread my research across several days (and sleepless nights), throwing out companies if I had concerns about the underlying business, the industry, or the sustainability of the dividend. That hard work ultimately boiled down to the three companies below.
Before we go directly to the picks, let's take one minute to highlight some of the stocks I threw out, and why.
First, I excluded all real estate investment trusts (REITs), currently among the highest yielders in the market. Two of the most popular on Fool.com are Annaly Capital
Next, I threw out companies that pay out more in dividends than their net income -- in other words, which have a payout ratio of more than 100%. Imagine paying your children more in allowance than you earn in each of the next 10 years. That sounds like a bad practice to me, and I don't want my hard-earned retirement dollars in companies doing the equivalent of that -- and I'd give you the same advice.
Two companies I excluded because of this were shipper Nordic American Tanker
Stock picks for a 2020 retirement
Now, let's jump right to the companies you're here for today. You'll notice some similar traits:
- You've heard of them all, and they may seem boring and stodgy. That's a good thing.
- There is a 100% chance the industry will be around in 2020.
- They're market leaders and the underlying business has a growth story.
- Their dividends are low right now, but they're sustainable, and growing fast!
First up, Yum! Brands
Capital IQ, a division of Standard and Poor's. CAGR = compound annual growth rate.
I believe Yum will continue to spread its KFC deliciousness throughout China and into emerging markets. This will throw off plenty of cash and keep that dividend growing year after year. By getting in now, your 2020 yield on today's investment should be quite substantial -- not to mention the great chance for stock price appreciation.
My second dividend payer for 2020 retirees is Hasbro
Capital IQ, a division of Standard and Poor's. CAGR = compound annual growth rate.
David Gardner most recently highlighted Hasbro for Motley Fool Stock Advisor members because of its similarities to Marvel. With decades of intellectual property, and stockpiles of mindshare among yesterday's children (who happen to be today's consumers), Hasbro should be able to utilize its massive library in new and exciting ways over the next decade.
Lastly, I'm recommending Wal-Mart
Capital IQ, a division of Standard and Poor's. CAGR = compound annual growth rate.
Among the three, I'm least excited about Wal-Mart's growth prospects, but I'm most excited about the safety it adds to the portfolio. As one of the largest employers in the United States, Canada, and Mexico, Wal-Mart isn't going away for a very long time. Combine that fact with the extremely healthy payout ratio and you get a very solid cornerstone for your dividend portfolio.
While I'm confident in these picks for 2020 retirees, you may choose to go with higher yielders or more obscure stocks for your portfolio. I definitely recommend doing further research and ultimately reaching your own conclusions, and I'm happy to point you in the right direction. Get in the fast lane on your dividend stock research by downloading a new free report called 13 High-Yielding Stocks to Buy Today, which highlights several more dividend payers, including one Fool analyst Jim Royal calls the dividend play of a lifetime. I invite you to get instant access to this report by clicking here now -- it's free.