11 Dividend-Paying Stocks for Passive Retirement Income

Dividend stocks are retiree friendly for a few reasons. The first and most obvious is that dividend stocks provide income at yields that beat out cash deposits and some bonds.

Dividend stocks are also relatively stable for equities, which is comforting for the retired investor. The same factors that allow these companies to pay dividends annually contribute to lower volatility -- reliable cash flows, manageable debt levels, and disciplined leadership.

And lastly, longtime dividend payers tend to raise their shareholder payouts over time. Retirees need rising income to combat inflation. Dividend stocks can provide that.

The downside of dividend payers is that the income isn't guaranteed to continue forever. Retirees can address that risk by choosing stocks that have demonstrated a lasting commitment to their shareholder payouts. Read on for 11 stocks that could fit the bill.

5 Stocks Under $49
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Oil and gas company Chevron (NYSE: CVX) is up double digits this year, a bright spot in an otherwise dreary market climate. The company enjoys a strong balance sheet, a leadership team that's committed to efficient capital spending, and low-cost assets that can accommodate fluctuating oil prices.

Chevron's dividend yield is about 4%, thanks to 2022 quarterly payments of $1.42 per share. The company has increased its annual payout in each of the past 35 years, which makes Chevron a Dividend Aristocrat. Those are S&P 500 companies that have raised dividends annually for the most recent 25 years.

ALSO READ: Why Chevron Stock Jumped 23% in the First Half of 2022

3M (NYSE: MMM) is a global manufacturer with more than 60,000 products spread across multiple industries. An efficient, productive research and development effort is a competitive advantage for 3M. The company's product pipeline is active, with a focus on fast-growing markets (like home improvement, manufacturing, and automotive).

Notably, one of 3M's strategic priorities for 2022 is maintaining a strong balance sheet, which allows for strategic acquisitions to complement organic growth.

3M currently pays shareholders $5.96 per share annually, for a competitive yield of 4.6%. The company has increased its dividend for 65 years consecutively.

Johnson & Johnson (NYSE: JNJ) is the world's largest healthcare company, generating over $90 billion in sales and nearly $20 billion in free cash flow in 2021.

The company has three segments -- branded drugs, consumer healthcare, and medical devices. It has announced its intention to spin off the consumer healthcare division but expects the overall dividend to remain unchanged after the spinoff is finalized.

Johnson & Johnson stock yields 2.57% on the yearly payout of $4.52 per share. The company has passed the Dividend King milestone of increasing its dividend annually for more than 50 years.

ALSO READ: Better Dividend Stock: AbbVie or Johnson & Johnson?

UGI (NYSE: UGI) is an energy holding company. Divisions include a natural gas and electric utility, a midstream and marketing operation, an international liquefied petroleum gas (LPG) distributor, and a U.S. LPG distributor. In total, UGI delivers energy-related services to 3 million customers across 18 countries. 2021 revenue topped $7.4 billion and free cash flow was $1.48 billion.

UGI has been paying shareholder dividends for 137 years, with dividend increases in each of the past 36. The yield is 3.51%, from cumulative annual payouts of $1.44 per share.

Procter & Gamble (NYSE: PG) manufactures and sells household products through a diversified portfolio of well-known brands -- including Tide, Gain, Gillette, Pampers, Pepto-Bismol, Vicks, and more. The company sells products in more than 180 countries.

The global strength of P&G's brands and the essential nature of its products are appealing qualities that contribute to stability. Procter & Gamble also has a complementary focus on innovation. In support of that, the company has transformed its operations internally to expedite product development and launch.

P&G shareholders are earning a 2.54% dividend yield on total annual payouts of $3.65 per share. Shareholders have seen a dividend increase in each of the past 66 years.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

Microsoft (NASDAQ: MSFT) is a global software provider and the world's second-largest cloud-computing provider behind Amazon. The company sells most of products on a subscription basis, which contributes to stable, predictable revenue. Microsoft also has a growing position in gaming and is well positioned to manage a shift from consoles to streaming.

Microsoft's dividend yield is 0.96%, which is at the low end for this list. But the company has increased its dividend for 20 years consecutively -- putting it in striking distance of earning Dividend Aristocrat status. In 2022, Microsoft's quarterly shareholder payment is $0.62 per share.

ALSO READ: Why Microsoft Stock Is a Buy During the Market Downturn

Coca-Cola (NYSE: KO) is a global leader in packaged beverages with a portfolio of well-known brands. Legacy brands Coke, Minute Maid, and Sprite are loved by consumers worldwide -- consumers who've willingly accepted inflation-related price increases in recent years.

Coke complements the stability of its legacy brands with innovation in packaging and flavors, plus expansion into new markets and beverage categories.

The beverage maker is a well-established Dividend Aristocrat, having increased its shareholder payout for 61 years in a row. The yield is currently 2.82%.

Note that Coke does have a moderately high dividend payout ratio of 74%. The payout ratio is the dividend as a percentage of net income. A very high ratio could indicate the dividend isn't sustainable. In Coke's case, the company has maintained its dividend program through much higher payout ratios.

Realty Income (NYSE: O) is an S&P 500 company (and Dividend Aristocrat) that's structured as a real estate investment trust, or REIT, which own and manage rent-producing real estate. Notably, REITs must pay out 90% of their net income to shareholders.

The company has more than 11,000 commercial properties under long-term leases, with customers spanning 70 industries.

Realty Income's dividend yield is competitive at 4.25%. Even better, the dividends are paid monthly. Most other dividend stocks are on a quarterly payout cadence.

ALSO READ: Why I'll Be Owning Realty Income Well Into Retirement

Merck (NYSE: MRK) develops and sells drugs and vaccines for humans and animals. The company has a strong position in cancer treatments, led by multibillion-dollar immuno-oncology drug Keytruda -- a key growth driver. The company's vaccine business also has momentum behind the HPV vaccine Gardasil.

Merck has a strong product pipeline, with important cancer, HIV, and COVID-19 treatments in the final phase of clinical trials.

Merck shareholders earn a dividend yield of about 3%, thanks to quarterly payments of $0.69 per share. The company has increased its dividends for 12 years consecutively.

Citigroup (NYSE: C) provides consumer and institutional banking and related wealth services in more than 100 countries. While that reach is impressive, it's not necessarily effective. In 2021, the company announced a geographic restructuring that will shift resources to higher-margin business areas -- namely wealth management and institutional services in Asia.

The global banking stock got an endorsement from famous investor Warren Buffett earlier this year. In the first quarter, he bought 55 million shares of Citigroup. Buffett is known for investing in companies with good long-term prospects that are trading below their true value.

Citigroup has paid dividends regularly since 2011. The payouts were minimal until 2016, when the quarterly dividend jumped from $0.05 per share to $0.16 per share. In 2022, shareholders are receiving $0.51 per share, per quarter, for a yield of 3.9%.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

Leggett & Platt (NYSE: LEG) is an under-the-radar manufacturer of products used in homes and cars. The company has leading positions in bedding components, automotive seat supports and lumbar systems, bedding foams, private label finished mattresses, adjustable beds, and flooring underlayment.

It generated $5 billion in revenue in 2021, for growth of 19% over the prior year. Earnings before interest and taxes, a measure of liquidity and profitability, rose 46% in 2021 to $596 million.

Leggett & Platt makes this list because it offers a competitive yield and strong history of dividend increases. The dividend yield is 4.64%, and the company has increased shareholder payouts for more than 50 years.

ALSO READ: This Unofficial Dividend King Is a Great Stock for Income Investors

None of the stocks mentioned should fund your retirement income on their own -- but each could be a role player in a diversified, income-generating portfolio.

While you will choose companies that are committed to their dividend programs, there's always the chance of a dividend reduction or cancellation. Proper diversification limits the impact of those outcomes. You can diversify by holding 20 or more individual stocks. Or opt for a low-fee dividend exchange-traded fund or mutual fund instead.

Know that it takes time and discipline to build a portfolio that produces a living income. If you're targeting $50,000 in annual payouts, for example, you'd need about $1.5 million worth of assets that yield 3.5%. That means the time is now to start investing for your passive retirement income.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Catherine Brock has positions in Coca-Cola, Johnson & Johnson, Microsoft, and Procter & Gamble. The Motley Fool has positions in and recommends Amazon and Microsoft. The Motley Fool recommends 3M and Johnson & Johnson and recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.