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 (NYSE: NLY) and its spinoff Chimera Investment (NYSE: CIM), which yield 14.2% and 17.1%, respectively. Even though highly respected Fool analyst Ilan Moscovitz recommended Annaly to Fool.com readers, I don't believe it or Chimera are suitable for those looking to retire in the next decade. They make their money on the spread between short- and long-term rates and are required to pay 90% of their taxable income to shareholders -– hence the massive dividends. When (not if) the Fed begins bumping up the short-term rates, that spread will decrease, and the dividend yield likely will follow. That sort of uncertainty works for investors with longer time frames, but those of us looking to retire in 2020 must demand greater assurance.

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 (NYSE: NAT), which funds its dividends by consistently issuing more shares, and rural telecom Windstream (Nasdaq: WIN). In addition, I don't like the prospects for the long-term (10-plus years) sustainability of the rural telecom industry. Even though a company throws off a lot of cash now, I'm more concerned about your 2020 retirement, not 2011 dividend payouts.

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 (NYSE: YUM), the company behind Kentucky Fried Chicken and Pizza Hut. I've already named it one of my favorite American stocks, and today I'm backing that up for 2020 retirees. Here are the vitals:


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 (Nasdaq: HAS), the company behind Transformers, G.I. Joe, Nerf, Milton Bradley, and a host of other well-known toys:       

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 (NYSE: WMT):

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.

Jeremy Phillips doesn't own shares of the companies mentioned in this article. Wal-Mart is a Motley Fool Inside Value pick and a Motley Fool Global Gains pick. Hasbro is a Motley Fool Stock Advisor recommendation. The Fool owns shares of Annaly Capital, Wal-Mart, and Yum! Brands. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.