It may not be a secret that investors love dividends, but many retirees absolutely have no choice but to invest in strong dividend stocks that have a history of stable or rising dividends. The waves of baby boomers have already started to retire, and those who have not retired will be retiring by the millions each year for the next decade.
In a world where interest rates are so low and uncertainty seems to be the norm, baby boomers need to look for stable dividend stocks that can compete with the current income of longer-term Treasury notes and bonds and for businesses that should grow to offer some capital appreciation over time as well.
24/7 Wall St. has identified many dividend issues and has addressed many retirement issues over the years. The numbers about retirement are scary for most Americans. If they are not in a pension plan, their Social Security payments each month in retirement will not make the golden years all that golden. The average 401(k) and IRA balance is also too small to fill the gap for most households, so these steady dividend payers are going to have to act as the bridge.
As of 2019, the average Social Security payment to a retiree was $1,461 per month, and that is expected to rise to about $1,503 per month in 2020. Many retirees may collect more than $2,000 each month, but the fixed income markets now do not offer enough yield to help retirees get extra income. The historically safe Treasury notes and bonds only offered an annualized yield of about 1.7% for 10 years and 2.1% for 30 years on last look, seemingly with very limited price appreciation potential.
We have compiled lists of stocks that investors can look at during most trading days and not worry about the state of their dividend ahead. Most of these companies have been dividend growers as well, so retirees and those nearing retirement should have at least some comfort when considering potential appreciation in the share price and the prospects of higher dividend payouts.
Most of these companies compete with or exceed the yield of the 30-year Treasury bond, but some are closer to that of the 10-year bond. In an effort to keep risks in mind, we have included the strengths of each company along with some of the risks and concerns so that investors get a big picture, rather than just the upside.
Here are 20 companies listed in alphabetical order, with another 20 companies coming soon, that should offer investors who are retired or near retirement some added income to help make their golden years safe and sound.
1. AbbVie
> Dividend Yield: 5.8%
Strengths: AbbVie Inc. (NYSE: ABBV) is best known for the mega-blockbuster drug Humira (the best seller in the world), and even though patent issues are a concern, it has other products and has many development partnerships with biotech and pharmaceutical giants. Its dividend is so high because its shares have pulled back so much, but analysts on Wall Street are still calling for earnings growth ahead. AbbVie is also diversifying, with its pending acquisition of Allergan.
Risks/Concerns: Drug price risks are front and center for drug companies today, and that’s going to be true under a Republican or a Democrat administration. Its valuation is low because Humira is facing European competition, and biosimilars will start selling in the United States in 2023. As it takes Allergan under its corporate umbrella, it is possible that the combined companies will face integration friction and may have some identity issues during the transitionary period.
2. Air Products and Chemicals
> Dividend Yield: 2.2%
Strengths: Air Products and Chemicals Inc. (NYSE: APD) has been a leader in the field of specialty and atmospheric gases to industries back to its founding before World War II. It sells to industries of all sorts and sizes, some cyclical and some steady. As of 2019, it also has raised its dividend 37 straight years and has a reasonable payout ratio that should be sustainable for years to come.
Risks/Concerns: After a big gain earlier in 2019, the company has seen its shares run into a wall, and many analysts have lowered their formal ratings. Despite its solid position as one of the few industry leaders, many companies offer niche sales that can act as competition over time.
3. AEP
> Dividend Yield: 2.9%
Strengths: American Electric Power Co. Inc. (NYSE: AEP) is a top electric utility in America with over 100 years of operations serving more than 5 million regulated customers, and its prime footprints are in many of the central states. It uses every energy source available, is very shareholder friendly and has a history of leading a “protect my dividend” effort that investors should praise.
Risks/Concerns: AEP still has more coal-fired electric plant generation that some regulators and politicians would prefer, and that is going to take time to remedy. Utilities face a potential regulatory onslaught if the climate change and global warming cases become the focal point of political platforms.
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