Brian Bollinger


Each of these high-quality dividend stocks yields roughly 4%, and you can expect them to grow their payouts even more. That’s a powerful 1-2 combo for retirement income.

The traditional retirement wisdom used to be the “4% rule.” You would withdraw 4% of your savings in the first year of retirement, followed by “pay raises” in each subsequent year to account for inflation. The idea? If you’re invested in a mix of dividend stocks, bonds and even a few growth equities, your money should last across a 30-year retirement.

But today’s world is different. Interest rates and bond yields have been driven into the ground, reducing future expected returns. Exacerbating the problem: Americans are living longer than ever before.

If you’re wondering how to retire without facing the uncomfortable decision of what securities to sell, or questioning whether you are at risk of outliving your savings, wonder no more. You can lean on the cash from dividend stocks to fund a substantial portion of your retirement. Indeed, Simply Safe Dividends has even provided an in-depth guide about living on dividends in retirement.

Many companies in the market yield 4% or more. And if you rely on solid dividend stocks for that 4% annually, you won’t have to worry as much about the market’s unpredictable fluctuations. Better still, because you likely won’t have to eat away at your nest egg as much, you’ll have a better chance of leaving your heirs with a sizable portfolio when the time comes.

Here are 20 high-quality dividend stocks, yielding on average well above 4%, that should fund at least 20 years of retirement, if not more. Each has paid uninterrupted dividends for more than two decades, has a fundamentally secure payout and has the potential to collectively grow its dividends to protect investors’ purchasing power over time.

Warren Buffett Stocks Ranked: The Berkshire Hathaway Portfolio
Data is as of Aug. 4. Stocks listed in reverse order of yield. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

1 of 20

Universal Health Realty Income Trust

Sector: Real estate
Market value: $982.5 million
Dividend yield: 3.9%

Universal Health Realty Income Trust (UHT, $71.35) is a real estate investment trust (REIT) boasting 71 investments in health-care properties across 20 states. Nearly three-quarters of its portfolio is medical office buildings and clinics; these facilities are less dependent on federal and state health-care programs, reducing risk. But UHT also has hospitals, freestanding emergency departments and child-care centers under its umbrella.

The REIT was founded in 1986 and got its start by purchasing properties from Universal Health Services (UHS), which it then leased back to UHS under long-term contracts. UHS remains a financially strong company that accounts for about 20% of Universal Health Realty Income Trust’s revenue today.

The firm has increased its dividend each year since its founding. However, unlike many dividend stocks that hike payouts once annually, UHT typically does so twice a year, albeit at a leisurely pace. The REIT’s current 69-cent-per-share dividend is about 1.5% better than it was at this time in 2019.

But as long as management continues focusing on high-quality areas of health care that will benefit from America’s aging population, the stock’s dividend should remain safe and growing.

2 of 20


Sector: Industrials
Market value: $87.1 billion
Dividend yield: 3.9%

3M’s (MMM, $151.21) sprawling business includes more than 60,000 products sold worldwide to a wide variety of end markets, including auto, health care, electronics, industrial and transportation.

Despite the cyclical nature of many of its end markets, 3M has paid dividends without interruption for more than a century while rewarding shareholders with higher dividends for 62 consecutive years.

Since its founding in 1902, 3M has focused on developing or acquiring niche products that represent a relatively small cost of a total product for customers but are also mission-critical to the desired outcome.

Coupled with the fact that many of its products are consumables, driving repeat purchases, 3M has consistently earned double-digit operating margins and generated reliable free cash flow.

3M’s conglomerate structure has created several challenges in recent years. Macro headwinds, slow-moving restructuring initiatives and various environment and product liabilities have weighted on its short-term outlook and dividend growth prospects.

However, 3M’s diversified product line, healthy balance sheet (including an A+ credit rating from Standard & Poor’s) and continued free cash flow generation seem likely to keep its dividend safe for income investors as they wait for a return to earnings growth.

3 of 20


Sector: Utilities
Market value: $7.0 billion
Dividend yield: 3.9%

UGI (UGI, $33.74) is a diversified utility that has managed to increase its dividend for 33 consecutive years thanks to its predictable cash flow.

Approximately 60% of UGI’s adjusted earnings are generated by distributing propane in the U.S. and Europe, including under the AmeriGas brand. Propane has many applications for households and businesses, including heating and cooking.

As the largest propane distributor in America and a leader in many of its European markets, UGI enjoys recurring demand for its services as its customers continue needing energy. Many of its customers do not have access to natural gas infrastructure, making propane their most practical source of energy for various applications.

Weather and changes in economic activity can impact short-term propane demand, but the low capital requirements of this business, coupled with UGI’s scale, makes it a fairly predictable cash cow.

The rest of UGI’s business is balanced between a regulated utility distributing gas and electricity in Pennsylvania and various midstream assets focused on natural gas in the Northeast.

Together, these businesses enabled UGI to generate stable or higher free cash flow each year during the 2007-09 financial crisis, and management expects the dividend to remain well covered by earnings during the COVID-19 pandemic.

4 of 20

Public Storage

Sector: Real estate
Market value: $35.2 billion
Dividend yield: 4.0%

Founded in 1972, Public Storage (PSA, $201.38) is the world’s largest owner of self-storage facilities and has paid dividends without interruption for almost 30 years.

“In general, the company’s business model is attractive. PSA benefits from economies of scale (it is by far the largest storage company), brand recognition, and locations with high barriers to entry,” writes Argus analyst Jacob Kilstein.

Self-storage warehouses generate excellent cash flow because they require relatively low operating and maintenance costs. Few customers are willing to deal with the hassle of moving to a rival facility to save a little money too, creating some switching costs.

And customers have historically prioritized making their self-storage rental payments. During the 2007-09 Great Recession, delinquency rates hovered around just 2%.

America’s self-storage industry is dealing with a short-term rise in supply, making it even more competitive to acquire customers and increase rent. But PSA maintains a strong balance sheet and seems likely to remain a dependable dividend payer for years to come.

5 of 20

Consolidated Edison

Sector: Utilities
Market value: $25.4 billion
Dividend yield: 4.0%

Founded in 1823, regulated utility Consolidated Edison (ED, $75.90) provides electric, gas and steam energy for 10 million people in New York City and surrounding areas.

Regulated utility operations account for about 90% of the firm’s earnings, resulting in predictable returns over the decades.

Coupled with New York’s ongoing need for reliable energy, Con Edison has managed to raise its dividend for 46 consecutive years. That’s the longest string of annual dividend increases of any utility company in the S&P 500.

Looking ahead, Con Edison’s dividend streak seems likely to continue, even despite the pandemic, which has resulted in lower commercial power use and higher bad debt costs.

About 87% of Con Edison’s revenues are subject to what are known as regulatory recovery mechanisms such as revenue decoupling. Essentially, these policies ensure utilities continue earning enough revenue to cover their costs and earn a fair return, reducing the incentive to sell more power and helping offset pressure when consumption dips unexpectedly.

The utility stock also remains conservatively managed, as demonstrated by its BBB+ investment-grade credit rating from Standard & Poor’s.

While Con Edison’s pace of dividend growth will likely remain slow, its payout continues to appear like a safe bet so long as regulators remain supportive of the firm’s needs during this unusual period of stress for New York City.

6 of 20


Sector: Communications
Market value: $239.6 billion
Dividend yield: 4.3%

Unlike rival AT&T, which has aggressively diversified its business into pay-TV and media content in recent years, Verizon (VZ, $57.91) has mostly focused on its core wireless business lately. In fact, the company even restructured in 2018 to better focus on its rollout of 5G service.

Good news on that front, too: Verizon expects to deliver its mobile Ultra Wideband 5G service to 60 cities by the end of this year. Its 5G Home fixed wireless access should also be in 10 markets by 2020’s end.

Thanks to its investments in network quality, the company remains at the top of RootMetrics’ rankings of wireless reliability, speed and network performance. These qualities have resulted in a massive subscriber base which, combined with the non-discretionary nature of Verizon’s services, make the firm a reliable cash cow.

In fact, Verizon and its predecessors have paid uninterrupted dividends for more than 30 years. Its dividend growth rate, like AT&T’s, is hardly impressive – VZ’s most recent payout hike was a mere 2% uptick in late 2019. But the yield is high among blue-chip dividend stocks, and the almost utility-like nature of Verizon’s business should let it slowly chug along with similar increases going forward.

7 of 20

Realty Income

Sector: Real estate
Market value: $21.2 billion
Dividend yield: 4.5%

Realty Income (O, $61.86) is an appealing income investment for retirees because it pays dividends every month. Impressively, Realty Income has paid an uninterrupted dividend for 600 consecutive months – one of the best track records of any REIT in the market.

The company owns more than 6,500 commercial real estate properties that are leased out to more than 600 tenants – including Walgreens (WBA), FedEx (FDX) and Dollar General (DG) – operating in 50 industries. These are mostly retail-focused businesses with strong financial health; nearly half of Realty Income’s rent is derived from tenants with investment-grade ratings.

Importantly, Realty Income focuses on single-tenant commercial buildings leased out on a “triple net” basis. In other words, rents are “net” of taxes, maintenance and insurance, which tenants are responsible for. This, as well as the long-term nature of its leases, has resulted not only in very predictable cash flow, but earnings growth in 23 of the past 24 years.

“The steady, stable stream of revenue has allowed Realty Income to be one of only two REITs that are both members of the S&P High-Yield Dividend Aristocrats Index and have a credit rating of A- or better,” writes Morningstar equity analyst Kevin Brown. “This makes Realty Income one of the most dependable investments for income-oriented investors, even during the current coronavirus crisis.”

Simply put, Realty Income is one of the most dependable dividend growth stocks for retirement. Investors can learn more from Simply Safe Dividends about how to evaluate REITs here.

8 of 20

Duke Energy

Sector: Utilities
Market value: $62.2 billion
Dividend yield: 4.6%

Duke Energy (DUK, $84.69) is about as steady as dividend stocks come. In fact, 2020 is the 94th consecutive year that the regulated utility paid a cash dividend on its common stock. It’s no surprise that Duke appears on Simply Safe Dividends’ list of the best recession-proof stocks.

The company services approximately 7.7 million retail electric customers across six states in the Midwest and Southeast. Duke Energy also distributes natural gas to more than 1.6 million customers across the Carolinas, Ohio, Kentucky and Tennessee. Most of these regions are characterized by constructive regulatory relationships and relatively solid demographics.

The company also maintains a strong investment-grade credit rating, which supports Duke’s dividend … and substantial growth plans over the next few years. The utility plans to invest $50 billion between 2019 and 2023 to expand its regulated electric and gas earnings base. If everything goes as expected, Duke should generate 4% to 6% annual EPS growth through 2023, driving similar upside in its dividend.

“Duke’s regulatory environment is consistent with its peers and is supported by better-than-average economic fundamentals in its key regions” writes Morningstar senior equity analyst Andrew Bischof. “These factors contribute to the returns Duke has earned and have led to a constructive working relationship with its regulators, the most critical component of a regulated utility’s moat.”

9 of 20

Southern Company

Sector: Utilities
Market value: $57.5 billion
Dividend yield: 4.7%

Regulated utilities are a source of generous dividends and predictable growth thanks to their recession-resistant business models. As a result, utility stocks tend to anchor many retirement portfolios.

Southern Company (SO, $54.44) is no exception, with a track record of paying uninterrupted dividends since 1948. The utility serves 9 million electric and gas customers primarily across the southeast and Illinois.

While Southern Company experienced some bumps in recent years because of delays and cost overruns with some of its clean-coal and nuclear projects, the firm remains on solid financial ground with the worst behind it.

Morningstar equity analyst Charles Fishman, says that while the company’s long-term 5% annual EPS growth is resilient, “uncertainties remain with respect to the impact of nuclear cost overruns, possible emissions legislation, and other fossil-fuel regulations.”

“However, compliance measures could prove to be less painful to shareholders than some might expect and could actually boost earnings due to rate base growth. We expect regulators will allow Southern to pass most of the incremental costs on to customers, preserving the firm’s long-term earnings power.”

When combined with the company’s payout ratio around 80%, which is reasonable for a regulated utility, Southern is positioned to continue rewarding shareholders with generous, moderately growing dividends.

10 of 20

Monmouth Real Estate Investment Corporation

Sector: Real estate
Market value: $1.4 billion
Dividend yield: 4.7%

Monmouth Real Estate Investment Corporation (MNR, $14.63) is an industrial-property REIT that was founded in 1968. The company rents out its nearly 120 industrial properties under long-term leases to mostly investment-grade tenants (81% of Monmouth’s revenue). Monmouth’s tenants include Ulta Beauty (ULTA), Best Buy (BBY) and Coca-Cola (KO).

Monmouth properties are relatively new, featuring a weighted average building age of just more than nine years. Its real estate also is primarily located near airports, transportation hubs and manufacturing facilities that are critical to its tenants’ operations.

The result is a cash-rich business model that has paid uninterrupted dividends for 28 consecutive years. But management hasn’t raised dividends for a while; the last improvement was a 6.25% hike in October 2017.

Still, the REIT sports a nice 99.4% portfolio occupancy rate and growing funds from operations (FFO, an important profitability metric for real estate investment trusts). Thus, shareholders may be in for more income growth down the road.

11 of 20


Sector: Communications
Market value: 11.4 billion
Dividend yield: 4.9%

Omnicom (OMC, $53.14) has paid uninterrupted dividends since it was formed in 1986 by the merger of several large advertising conglomerates. The provider of advertising and marketing services serves more than 5,000 clients in over 70 countries.

No industry exceeds 15% of total revenue, and over 40% of sales are derived outside of the U.S.

Many clients prefer to work with only a couple of agencies in order to maximize their negotiating leverage and the efficiency of their marketing spend.

As one of the largest agency networks in the world with decades of experience, Omnicom is uniquely positioned to serve multinational clients with a complete suite of services.

That said, the marketing world is evolving as digital media continues to surge.

Alphabet (GOOGL), Facebook (FB), Amazon (AMZN), Accenture (ACN) and other non-traditional rivals are all trying to get a piece of these fast-growing advertising markets.

While the global advertising market seems likely to continue expanding with the economy over time, it will be important for Omnicom to maintain its strong client relationships and continue adapting its portfolio to remain relevant.

“The emergence and growth of digital media, which has brought along more below the line, or a more targeted marketing and advertising platform, has also driven increased consolidation within the ad space,” writes Ali Mogharabi, senior equity analyst at Morningstar, “as Omnicom and its peers have acquired various smaller agencies that focused on the growing digital advertising niche within the overall ad space.”

With larger clients preferring multichannel advertising campaigns, these deals are expected to help make Omnicom “platform-agnostic and one-stop shops.”

Omnicom’s large size and diverse mix of business limit its growth potential. But its strong balance sheet, predictable free cash flow, and ongoing commitment to its dividend likely make OMC a safe bet for income investors.

12 of 20


Sector: Industrials
Market value: $451.3 million
Dividend yield: 5.2%

Ennis (EBF, $17.31) is a wonderfully boring stock, selling business products and forms such as labels, tags, envelopes and presentation folders. The company, founded in 1909, has grown via acquisitions to serve more than 40,000 distributors today.

While the world is becoming increasingly digital, Ennis has carved out a nice niche, as 95% of the business products it manufactures are tailor-made to a customer’s unique specifications for size, color, parts and quantities. This is a diversified business, too, with no customer representing more than 5% of company-wide sales.

Ennis is a cash cow that has paid uninterrupted dividends for more than two decades. While the company’s payout has remained unchanged for years at a time throughout history, management has started to more aggressively return capital to shareholders, including double-digit dividend raises in 2017 and 2018.

Ennis last announced a 12.5% dividend increase in June 2018, reflecting its solid financial health. In fact, Ennis holds more cash than debt. Meanwhile, its payout ratio of 71%, while elevated, still leaves enough room for modest dividend raises going forward, should it choose.

Ennis will never be a fast-growing business. But if you’re looking for a hefty yield from your dividend stocks, EBF doles out more than 5%. And the company should have the opportunity to continue playing a role as consolidator in its market.

13 of 20

Toronto-Dominion Bank

Sector: Financials
Market value: $80.6 billion
Dividend yield: 5.3%

Toronto-Dominion Bank (TD, $44.70) is one of North America’s largest financial institutions. The bank’s revenue is balanced between simple lending operations such as home mortgages and fee-based businesses such as insurance, asset management and card services. Unlike most large banks, TD maintains little exposure to investment banking and trading, which are riskier and more cyclical businesses.

As one of the 10 largest banks on the continent, TD’s extensive reach and network of retail locations has provided it with a substantial base of low-cost deposits. This helps the company’s lending operations earn a healthy spread and provides the bank with more flexibility to expand the product lines it can offer.

Shareholders have received cash distributions since 1857, making TD one of the oldest continuous payers among all dividend stocks. A conservative corporate culture and strong investment-grade rating are reasons to believe in the sustainability of the dividend going forward.

14 of 20

National Retail Properties

Sector: Real estate
Market value: $6.2 billion
Dividend yield: 5.8%

National Retail Properties (NNN, $35.95) has increased its dividend for 30 consecutive years. For perspective, only two other publicly traded REITs in America have raised their dividends for an equal amount of time or longer.

This REIT owns approximately 3,100 freestanding properties that are leased out to more than 380 retail tenants – including 7-Eleven, Mister Car Wash and Camping World (CWH) – operating across more than 35 lines of trade. No industry represents more than 18.1% of total revenue, and properties are primarily used by e-commerce-resistant businesses such as convenience stores and restaurants.

Like Realty Income, National Retail is a triple-net-lease REIT that benefits from long-term leases, with initial terms that stretch as far as 20 years. Its portfolio occupancy as of mid-year 2020 was 98.7%; it hasn’t dipped below 96% since 2003, either – a testament to management’s focus on quality real estate locations.

National Retail’s dividend remains on solid ground, even as the retail world evolves.

“Management has approached the pandemic with a long-term view. To this point, the company has approached tenants with this same principle, and wanted to work with their long-term customers to ensure the best outcome for all involved,” Stifel analysts wrote in a recent note. “As a result, the company has heard very positive feedback from its tenants, and continues to believe these relationships are especially important to the company’s long-term success.”

15 of 20

W.P. Carey

Sector: Real estate
Market value: $12.4 billion
Dividend yield: 5.9%

W.P. Carey (WPC, $71.17) is a large, well-diversified REIT with a portfolio of “operationally-critical commercial real estate,” as the company describes it. More specifically, W.P. Carey owns more than 1,200 industrial, warehouse, office and retail properties.

The company’s properties are leased out to more than 350 tenants under long-term contracts, with 99% of its leases containing contractual rent increases. W.P. Carey’s operations are also nicely diversified – more than a third of its revenue is generated outside of the U.S., its top 10 tenants represent less than 22% of its rent, and its largest industry exposure is about 22% of its revenue.

REITs, as a sector, are among the highest-yielding dividend stocks on the market given a structure that literally mandates they pay out 90% of their profits as cash distributions to shareholders. But W.P. Carey and its 5.9% yield stick out. Better still, thanks to its aforementioned qualities, as well as its strong credit and conservative management, WPC has paid higher dividends every year since going public in 1998. It should have little trouble continuing that streak for the foreseeable future.

16 of 20


Sector: Energy
Market value: $161.5 billion
Dividend yield: 6.0%

Chevron (CVX, $86.49) is arguably the best positioned and most committed oil major to continue paying its dividend during these turbulent times in the energy sector.

The company’s net debt-to-capital ratio, which measures the portion of a company’s financing that is from debt, was 13% at the end of 2019, well below the 20% to 30% average of its peers.

As a result of its superior balance sheet capacity, as well as moves made to shore up its liquidity in the meantime, Chevron can afford to wait longer for oil prices to improve while maintaining its dividend.

In fact, management has estimated that Chevron’s net debt ratio would not exceed 25% even if Brent oil prices averaged $30 per barrel in 2020-21 and it borrowed to help cover its dividend.

With 33 consecutive years of dividend increases, this integrated energy giant is committed to protect its status as a Dividend Aristocrat.

Chevron ultimately needs oil prices to increase to about $55 per barrel to cover its dividend capital expenditures with operating cash flow only.

But its balance sheet strength and unwavering commitment to its dividend for the foreseeable future make it an interesting contrarian idea for income investors who are interested in a relatively lower-risk energy stock.

17 of 20


Sector: Communications
Market value: $213.8 billion
Dividend yield: 6.9%

AT&T (T, $30.01) is a Dividend Aristocrat that has paid higher dividends for 36 consecutive years, and it’s also featured on Simply Safe Dividends’ best high-dividend stocks list.

But the company has undergone some rather dramatic business changes in recent years. From acquiring DirecTV to merging with Time Warner, AT&T has morphed into a true media conglomerate with more than 370 million direct-to-consumer relationships across wireless, internet and video.

AT&T is bundling together its unique assets to increase the value of its customer relationships, reduce churn and develop a sizable advertising business. It will take years to assess the success of management’s chess moves, which have significantly increased the firm’s debt load, but the dividend appears to remain on reasonably solid ground.

In fact, management expects the company’s free cash flow (FCF, the cash profits a company generates after making necessary capital expenditures) payout ratio to sit around the “60% range” by the end of this year, according to CFO John Stephens.

While AT&T’s pace of dividend growth will remain moderate during this period, its high yield will provide income investors with some nice compensation as the business digests its recent deals and works on evolving for the future.

18 of 20


Sector: Energy
Market value: $66.8 billion
Dividend yield: 7.3%

Canada’s Enbridge (ENB, $32.98) offers a combination of very high yield and growth rarely seen in most dividend stocks – and it should continue to do so for at least for the next few years.

Enbridge owns a network of transportation and storage assets connecting some of North America’s most important oil- and gas-producing regions. As the continent’s energy production grows over the years ahead – thanks largely to advances in low-cost shale drilling – demand also should increase for many of Enbridge’s pipeline-focused capabilities.

ENB is recovering from COVID impacts to its business, too. “During its conference call, ENB spent time discussing Mainline volumes and the outlook for the remainder of the year,” write UBS analysts, who maintain their Buy rating but increased their 2020 and 2021 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) estimates. “With the exception of another economic shutdown, ENB expects year end Mainline volumes to be closer to 1Q20 volumes.”

That said, the dividend gives shareholders plenty of cushion; the midstream energy stock yields north of 7%. That’s thanks in part to a nearly 10% improvement to the payout earlier this year.

19 of 20

Pembina Pipeline

Sector: Energy
Market value: $14.0 billion
Dividend yield: 7.4%

Pembina Pipeline (PBA, $25.45) began paying dividends after going public in 1997 and has maintained uninterrupted payouts ever since. The pipeline operator transports oil, natural gas and natural gas liquids primarily across western Canada.

Energy markets are notoriously volatile, but Pembina has managed to deliver such steady payouts because of its business model, which is underpinned by long-term, fee-for-service contracts.

In fact, management has a target of generating 80% of Pembina’s EBITDA (earnings before interest, taxes, depreciation and amortization) from fee-based activities in 2020, though that’s estimated to hit 90%-95% this year. The firm’s dividend is expected to remain more than covered by fee-based distributable cash flow (DCF, an important cash metric for pipeline companies), providing a nice margin of safety. For comparison’s sake, its payout represented 135% of its DCF in 2015; it’s expected to be just 70%-75% this year.)

The dividend is further protected by Pembina’s investment-grade credit rating, focus on generating at least 75% of its cash flow from investment-grade counterparties, and self-funded organic growth profile.

Pembina’s financial guardrails and tollbooth-like business model should help PBA continue to produce safe dividends for years to come.

20 of 20

Enterprise Products Partners LP

Sector: Energy
Market value: $38.9 billion
Distribution yield: 10.0%*

Enterprise Products Partners LP (EPD, $17.78), a master limited partnership (MLP), is one of America’s largest midstream energy companies. It owns and operates more than 50,000 miles of pipelines, as well as storage facilities, processing plants and export terminals across America.

This MLP is connected to every major shale basin as well as many refineries, helping move natural gas liquids, crude oil and natural gas from where they are produced by upstream companies to where they are in demand.

Approximately 85% of Enterprise’s gross operating margin is from fee-based activities, reducing its sensitivity to volatile energy prices. The firm also boasts one of the strongest investment-grade credit ratings in its industry and maintains a conservative payout ratio. Its DCF for the second quarter of 2020 was 160% of what it needed to cover its distribution.

That distribution keeps swelling, too. Enterprise not only has paid higher distributions every year since it began making distributions in 1998, but it raises those payouts on a quarterly basis, not just once a year.

The firm’s future looks bright thanks to its “strategically-located assets, diverse cash flows and organic growth potential, particularly with regard to Gulf Coast export markets,” writes CFRA equity analyst Stewart Glickman.

Investors can learn more from Simply Safe Dividends about how to evaluate MLPs here.

* Distributions are similar to dividends but are treated as tax-deferred returns of capital and require different paperwork come tax time.

Brian Bollinger was long ED, MMM, OMC and PSA as of this writing.

Author: Brian Bollinger

Source: Kiplinger: 20 Dividend Stocks to Fund 20 Years of Retirement

The Dow Jones Industrial Average, conceived by Charles Dow in 1896 to serve as the market’s benchmark, nowadays also serves as a can’t-miss index for income investors. Especially if you’re looking for dividend growth stocks.

The Dow consists of 30 large-cap U.S. businesses that are meant to reflect America’s economy. Its constituents include many iconic companies, including Exxon Mobil (XOM) and Coca-Cola (KO). Impressively, all 30 stocks pay dividends.

Several of these companies can be found in Simply Safe Dividends’ best high dividend stocks list. But high current yield isn’t the only dividend metric you should look at. Dividend increases, for instance, can not only lead to higher yields later down the road, but also act as a signal helping you to identify companies with rising profits and a sturdy balance sheet.

Let’s review nine of the best Dow Jones dividend growth stocks. These companies appear to be the best equipped to continue rewarding their shareholders with safe and fast-growing dividends for years to come.


MARKET VALUE: $1.4 trillion


Apple (AAPL, $321.55) is the largest equity stake among Berkshire Hathaway’s (BRK.B) dividend stocks, which Simply Safe Dividends has analyzed in detail.

Warren Buffett likes to own businesses that generate a lot of cash and have durability. With an iconic brand, an operating margin routinely north of 20% and a portfolio of loved hardware products and (increasingly) services, Apple is no exception. Indeed, Apple’s dividend is becoming an increasingly important factor in owning the stock.

AAPL reinstated its payout in 2012 and has increased it each year since. The company’s dividend has potential to grow at a double-digit rate thanks to the iPhone maker’s low earnings payout ratio near 25%, fortress balance sheet with more than $200 billion in cash and marketable securities, and its fast-growing Services division.

This high-margin business consists of popular software services – such as iCloud, Apple Pay and the App Store – that are integrated into Apple’s hardware products. Services accounted for about 18% of AAPL’s total revenue in fiscal 2019, and that number is expected to keep climbing.

Given the capital-light nature of this business and its double-digit growth rate, Services has the potential to boost Apple’s already substantial profits. That in turn puts Apple among the highest-potential dividend growth stocks.

Home Depot

MARKET VALUE: $262.5 billion


Home Depot (HD, $240.61), whose roots date back to 1978, has grown to become the largest home improvement retailer in America with more than 2,200 stores across the U.S., Canada and Mexico.

Leveraging its size, Home Depot can afford to offer more than 1 million products between its indoor retail space and e-commerce business, making one-stop shopping easy, convenient and affordable for its customers.

While online shopping is disrupting many areas of brick-and-mortar retail, home improvement is not one of them. Morningstar senior equity analyst Jaime Katz even believes this industry is “one of the best insulated sectors from e-commerce threats,” noting that many of its products are heavy and thus uneconomical to ship to individual consumers. Other goods require employees’ specialized knowledge, too.

Home Depot has paid uninterrupted dividends for more than 30 years while recording 20%-plus annual dividend growth over the trailing five- and 20-year periods. With a healthy payout ratio near 50% and a track record of delivering double-digit earnings growth most years, this Dow stock’s dividend has good potential to continue rising at a healthy clip in the years ahead.


MARKET VALUE: $160.6 billion


McDonald’s (MCD, $213.21) is the largest fast-food retailer in the world with more than 38,000 locations in more than 100 countries.

But rather than owning and operating all of its stores, McDonald’s has franchised about 93% of its restaurants to independent businesspeople. Because franchisees pay for most of a restaurant’s kitchen equipment, signs, seating and other expenses, McDonald’s enjoys a capital-light business that generates excellent margins and cash flow.

Yes, McDonald’s has to ensure customers receive a consistent experience from one location to the next. But otherwise, the fast-food giant sits back and collects high-margin rent payments and royalties based largely on a percentage of a restaurant’s sales from its franchisees. In a way, it’s the closest thing resembling a real estate operator among the Dow’s best dividend growth stocks.

Not surprisingly, McDonald’s shares many qualities with the most recession-proof dividend stocks reviewed by Simply Safe Dividends.

MCD last raised its dividend by 8% in September 2019, continuing its track record of raising its cash distribution each year since it began paying dividends in 1976. With a reasonable payout ratio near 60%, an investment-grade balance sheet and analysts’ expectations calling for continued mid-single-digit growth in earnings per share (EPS), investors can likely expect a similar pace of dividend growth to continue.


MARKET VALUE: $456.5 billion


CFRA analyst Chris Kuiper sums up Visa’s (V, $205.99) long-term thesis in one sentence:

“We believe investors underestimate the top-line growth potential for Visa given the world market where 85% of transactions are still done in cash.”

As electronic payments continue taking market share, Kuiper believes Visa’s revenue growth rate could escalate to nearly 15% annually over the next three to five years. The resulting profits would likely help the global payments firm easily continue its track record of growing its dividend by about 20% annually over the past half-decade.

“We see electronic payments increasingly driven by mobile, with Visa in a leadership position,” he adds. “International is another major growth driver, and we note the acquisition of Visa Europe.”

This Dow dividend stock’s strong payout growth potential is further supported by its earnings payout ratio, which sits near a low level of 20%. The company also enjoys an AA investment-grade credit rating from Standard & Poor’s.

Simply put, Visa’s financial health is excellent, and its outlook for future growth remains just as bright.


MARKET VALUE: $218.9 billion


For many decades, drugmaker Merck’s (MRK, $85.66) dividend hikes were nothing to boast about, averaging about 2% to 3% annually. But MRK has been among the more aggressive Dow dividend growth stocks of late; the company increased its dividend by 15% in October 2018, then announced an 11% hike in November 2019.

Merck’s revenue declined steadily from 2011 through 2015 as its drug development efforts weren’t enough to offset headwinds created by the patent cliff. After stagnating for several years, Merck’s revenue climbed 5% in 2018. Growth continues to accelerate; the company just reported an 11% sales increase during 2019.

Morningstar director Damien Conover notes that new product launches have successfully warded off generic competition to offset losses from drugs losing exclusivity. Merck’s Keytruda drug for cancer treatment is an especially important blockbuster opportunity with multibillion-dollar revenue potential.

MRK boasts an earnings payout ratio below 50% and an investment-grade balance sheet. Meanwhile, analysts expect mid-single digit EPS growth in 2020 (driven by Keytruda). Thus, Merck’s dividend looks safe and appears to have healthy growth potential, especially compared to its historical pace.

Coupled with its above-average dividend yield, Merck could be an appealing candidate for retirees seeking to live off dividends – a concept explained by Simply Safe Dividends.

American Express

MARKET VALUE: $107.1 billion


American Express (AXP, $132.24), another holding in Berkshire Hathaway’s portfolio, was formed in 1850 and provides consumers and businesses with credit card and travel-related services.

While the credit card industry is rife with competition, American Express has long differentiated itself as one of the most valuable brands in the world by focusing on excellent customer service. In fact, the firm typically ranks No. 1 for customer satisfaction among credit card companies in the U.S. according to J.D. Power.

As a result, the firm has amassed more than 110 million cards in force, racking up over $1.2 trillion in worldwide billed business each year.

Merchants want to work with AmEx because of its large and premium-focused customer base, and American Express’s customers want access to its attractive rewards, which are made possible by the higher discount revenue earned from merchants. This creates somewhat of a network effect to help the firm continue adding new cardholders with strong credit and above-average spending habits.

Coupled with management’s financial conservatism, which earns the business an investment-grade credit rating from Standard & Poor’s, American Express has managed to pay uninterrupted dividends since 1987 while growing its payout by about 10% annually in each of the past five years.

AXP management expects double-digit EPS growth to continue as card member spending, loans and fee-based products continue to expand. That suggests this Dow dividend growth stock can continue its pace of payout hikes.


MARKET VALUE: $284.0 billion


Incorporated in 1968, Intel’s (INTC, $66.39) microprocessors power many of the world’s computers and servers. While Intel’s core personal computing market is very mature following growth in mobile devices, the company has branched into new growth areas such as artificial intelligence, electronics in cars and connected devices. Cloud computing also is bolstering demand for more data centers, which account for about half of Intel’s revenue.

Morningstar analyst Abhinav Davuluri writes that the firm’s above-average spending on R&D and capital expenditures have helped INTC better control its complex manufacturing process, resulting in chips that deliver better performance and greater cost efficiencies compared to rivals.

Overall, management believes the company’s addressable market exceeds $300 billion. For context, Intel’s annual revenue is about $70 billion, which suggests the chipmaker still has plenty of areas to grow into, and profitably.

Intel’s potential among dividend growth stocks is notable, too. The company has paid uninterrupted dividends for more than two decades, compounding its payout by about 7% annually over the past five years.

Intel maintains an excellent A+ credit rating from Standard & Poor’s, and its sub-30% payout ratio is at its lowest level in more than a decade. This should make mid- to high-single-digit annual dividend growth a realistic possibility for INTC investors in the years ahead.


MARKET VALUE: $155.8 billion


Nike (NKE, $100.02) owns one of the most well-known brands in the world, driven by its more than $3.7 billion in annual spending on advertising and endorsement deals with popular athletes to enhance the connection its brands enjoy with consumers.

Combined with its continuous introduction of quality and innovative products, NKE enjoys solid pricing power and has established itself as the largest seller of athletic footwear and apparel in the world.

Despite its size, Nike’s revenue has more than doubled since 2010, and its dividend has nearly quadrupled, compounding by more than 13% annually.

With about 60% of total revenues derived in international markets, many of which offer solid long-term growth prospects as the middle-class population grows in developing economies, Nike should have a long runway to continue expanding its business. Yes, the company has warned about the effects of the coronavirus outbreak in China, which made up 18% of revenues in its most recent quarter. But that appears to be no more than a short-term hiccup for now.

Nike’s dividend has great growth potential, too. Analysts expect NKE to record double-digit EPS growth once again in 2020, and its payout ratio near 30% has plenty of room to expand as well. Investors can likely expect Nike to continue doling out dividend increases of around 10% annually.


MARKET VALUE: $1.4 trillion


The tech sector isn’t known for its dividends, but Microsoft (MSFT, $188.70) is among the exceptions. The firm has delivered uninterrupted dividends since 2003, and its cash distribution has nearly quadrupled since 2010, including an 11% raise announced in September 2019.

Microsoft represents one of the more impressive corporate turnarounds of the past decade, going from declining revenue as late as fiscal 2016 to double-digit sales growth in its most recent year.

Argus analyst Joseph Bonner explains that CEO Satya Nadella successfully pivoted Microsoft toward commercial and cloud application businesses and is also benefiting from growing IT spending, especially for hybrid cloud solutions.

Bonner doesn’t think the growth is done, either. He writes that MSFT can deliver about 11% to 12% EPS expansion in each of the next two years as it continues riding these trends. This makes it all the more likely that the company will keep up its double-digit dividend growth.

Also, very few dividend growth stocks are as financially strong as Microsoft, which earns a “Very Safe” Dividend Safety Score from Simply Safe Dividends.

Microsoft is just one of two companies that hold Standard & Poor’s top credit rating of AAA; the other is Johnson & Johnson (JNJ). That means Microsoft’s debt is literally rated better than that of the U.S. government. MSFT also boasts a healthy sub-40% payout ratio and its free cash flow margin is just shy of 30%.

This is a business with staying power, especially for long-term dividend growth investors.

Author: Brian Bollinger

Source: Kiplinger: The 9 Best Dow Jones Dividend Growth Stocks

In retirement, investors must figure out how to generate enough income without a job while also ensuring that they don’t outlive their income stream. The best retirement stocks to buy in 2020 (or any other year), then, assuredly must be dividend-paying ones.

Receiving regular dividends reduces an investor’s dependence on the market’s fickle price swings to make ends meet. Whether or not the market rises or falls in 2020, a portfolio of quality businesses can continue delivering predictable, growing dividend income.

Compared to many fixed-income investments, dividend stocks also can generate higher current income in today’s low-interest-rate environment, growing their payouts each year to help preserve one’s purchasing power. Dividend stocks, like other equities, provide meaningful long-term price appreciation potential as well.

Research firm Simply Safe Dividends published an in-depth guide about living on dividends in retirement here. However, a key component to this strategy is finding the best retirement stocks that can deliver safe dividends and grow in value over time.

On that note, these are the 20 best retirement stocks to buy in 2020. The 20 stocks on this list appear to have safe dividends, yield between 3.5% and 6.9%, and have solid potential to continue growing their payouts in the long term.

Flowers Foods

MARKET VALUE: $4.6 billion



SECTOR: Consumer staples

People have to eat, and Flowers Foods (FLO, $21.69) has served this basic need since 1919. The baked goods company sells a variety of breads, buns, snack cakes and rolls. While bread is a very mature product category, Flowers has some of the most relevant brands.

The company’s Dave’s Killer Bread is the nation’s largest organic bread brand, and Canyon Bakehouse is the fastest-growing gluten-free bread brand in the country. Flowers also owns Nature’s Own, the No. 1-selling loaf bread brand; Wonder Bread, which enjoys 98% consumer awareness; and TastyKake, among others.

Consumers continue buying these products in good times and bad, making Flowers a recession-resistant business – a common trait among many of the best retirement stocks to buy. The company’s sales slipped just 2.6% during the Great Recession. And FLO shares only lost 2% while the S&P 500 slumped 56.8% during the 2007-09 bear market. Add in dividends, and Flowers actually eked out a positive total return of 0.8%.

Flowers’ dividend has been reliable, too. The company has raised its payout each year since it began distributing dividends in 2002. With an investment-grade credit rating, excellent cash flow generation, and a reasonable payout ratio of roughly 80%, Flowers’ dividend seems likely to remain a safe bet.

Crown Castle International

Milky way galaxy over communication tower for broadcasting during clear sky. Taken in Mt. Bromo, Surabaya, Indonesia.

MARKET VALUE: $55.9 billion



SECTOR: Real estate

Crown Castle International (CCI, $134.53) is the largest provider of shared communications infrastructure in America, with a portfolio of more than 40,000 cell towers, about 70,000 small cell nodes and over 75,000 route miles of fiber.

The real estate investment trust’s (REIT) assets are leased to wireless service providers such as Verizon (VZ) and AT&T (T). These firms place their equipment on Crown Castle’s towers and small cells so they can beam their signals to mobile devices used by consumers and businesses.

This is a predictable, durable business in part because there are no viable alternatives. Most of Crown Castle’s revenue is recurring, too, backed by long-term contracts with embedded growth from rent escalators.

As demand for data continues rising, carriers likely will continue investing in their networks. Crown Castle’s towers and small cell networks should enjoy even higher utilization rates and profitability as this plays out.

The firm has grown its payout each year since it converted to the REIT business structure in 2014. Going forward, management believes 7% to 8% annual dividend growth in the long term is a reasonable target. That’s more than acceptable for investors seeking out retirement stocks that can provide both current income and dividend growth. It’s no wonder why CCI is a holding in Bill Gates’ dividend portfolio.

Realty Income

MARKET VALUE: $24.8 billion



SECTOR: Real estate

Simply Safe Dividends pegs Realty Income (O, $75.94) as one of the best monthly dividend stocks in the market, and that easily earns it a spot among the best retirement stocks to buy in 2020.

The retail REIT – which goes so far as to call itself “The Monthly Dividend Company” – has a track record of paying uninterrupted monthly dividends for nearly 50 consecutive years. Just as impressively, Realty Income is one of just two S&P 500 REITs to have recorded positive earnings growth, dividend growth and total returns during the financial crisis.

This has historically been a durable business. Kevin Brown, equity analyst at Morningstar, writes that Realty’s “line of business and operating metrics make its dividend one of the most stable sources of income for investors.”

Brown also notes that even though more than 80% Realty’s tenants are in retail, more operate in defensive, service-focused industries that are buffered from e-commerce headwinds.

Combined with Realty’s investment-grade credit rating and impressive diversification – which includes exposure to nearly 50 industries and over 270 tenants – Realty Income’s dividend should remain a dependable bet for income and growth in the years ahead.

National Retail Properties

MARKET VALUE: $9.5 billion



SECTOR: Real estate

National Retail Properties (NNN, $55.11) boasts 30 consecutive years of annual dividend increases, an investment-grade balance sheet and an average annual total return of 14% across the past 25 years.

It’s no wonder why the retail REIT is appealing for retirement portfolios.

National Retail is, like Realty Income, a triple-net-lease REIT, which means it’s not responsible for taxes, insurance and maintenance costs – the tenants are. NNN simply collects the rent. The REIT owns more than 3,000 properties that it rents out under long-term lease contracts to 400-plus tenants operating across nearly 40 industries.

Management has been careful to diversify National Retail’s business to protect its cash flow over a full economic cycle. The firm’s largest exposure is to convenience stores, which account for 17.5% of rent, then full-service restaurants (11.3%) and automotive service stores (9.3%).

Unlike parts of brick-and-mortar retail that are under pressure, National Retail’s properties remain resilient. The firm’s occupancy rate stands at 99.1%. And as CFRA equity analyst Chris Kuiper writes, the firm’s portfolio appears resistant to e-commerce.

“We think NNN is more insulated from retailer woes compared to peers as most of NNN’s tenants are either restaurants or retailers focused on necessity-based shopping such as convenience stores, auto parts/service centers and banks,” he writes.

Given National Retail’s diversified portfolio, strong balance sheet, online-resistant locations and reasonable payout ratio, this top-flight retirement stock should have no trouble extending its dividend growth streak for the foreseeable future.

Public Storage

MARKET VALUE: $37.2 billion



SECTOR: Real estate

Public Storage (PSA, $212.95) has paid dividends without interruption for more than 25 consecutive years, and the self-storage REIT continues to rank among the best retirement stocks today.

With over 2,400 properties in America, Public Storage is the largest owner and operator of self-storage facilities in the country. The company also is bigger than its next three public competitors combined.

Thanks to its large size, Public Storage can maximize its operating efficiency and the benefit of branding across its portfolio since most of its properties are in major metropolitan centers.

Storage is a defensive industry, too, making it an appealing place to invest part of a retirement portfolio. While there are few barriers to entry, the overall economics still support dependable cash flow for Public Storage.

Besides sporting an occupancy rate in excess of 90%, Public Storage benefits from raising customers’ rent over time. Morningstar equity analyst Yousuf Hafuda notes that the “average customer receiving a rent increase letter for 8%-10% will rarely find it beneficial to research a new facility, rent a moving truck, and spend a day relocating to a different facility to save $10-$15 per month.”

Coupled with storage facilities’ low maintenance needs and the recession-resistant nature of demand, Public Storage is a durable cash cow. The firm’s “A” credit rating from Standard & Poor’s and healthy payout ratio of less than 80% of funds from operations (FFO, an important REIT profitability metric) should ensure that its dividend remains safe, regardless of how industry supply and demand trend.

Brookfield Infrastructure Partners LP

MARKET VALUE: $15.4 billion



SECTOR: Utilities

Brookfield Infrastructure Partners LP (BIP, $52.56), a master limited partnership (MLP), is listed as a utility stock but is much different than the sector’s typical electricity and gas providers. BIP owns numerous infrastructure assets, including railroads, natural gas pipelines, telecom towers, electrical transmission lines and toll roads.

These long-life assets provide critical services and are often difficult to replicate. Most importantly, they generate reliable cash flow, with 95% of the firm’s adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) generated by regulated or long-term contracts.

Management expects FFO per unit (the master limited partnership equivalent of shares) to grow 6% to 9% going forward, driven by volume upside from GDP growth, inflationary price increases (75% of the firm’s EBITDA is indexed to inflation) and a large backlog of projects.

Combined with the firm’s investment-grade credit rating and conservative payout ratio target of 60% to 70% of funds from operations, Brookfield Infrastructure Partners’ distribution should remain a solid bet with decent growth prospects. Indeed, management has upgraded the distribution each year since the firm went public in 2008.

Management has increased the distribution each year since the firm went public in 2008, and long-term growth opportunities should be plentiful as countries worldwide continue investing in their infrastructure.

It’s also worth noting the partnership structures its activities to avoid generating unrelated business taxable income. Therefore, unlike most limited partnerships that can have more complicated taxes, Brookfield’s units are suitable for owning in retirement accounts.

One final note that investors should be aware of: The firm will split its shares to launch Brookfield Infrastructure Corporation, which is being structured with the intention of being economically equivalent to BIP units. The difference? The corporation will not deal with partnership taxes, as investors will instead receive common dividend reporting slips. Regardless of which entity investors choose, as a Canadian company, Brookfield will withhold 15% of its distribution to U.S. investors. But because of a tax treaty with Canada, U.S. investors can deduct this amount dollar-for-dollar as part of the foreign withholding tax credit.

* Distribution yields are calculated by annualizing the most recent distribution and dividing by the share price. Distributions are similar to dividends but are treated as tax-deferred returns of capital and require different paperwork come tax time.


MARKET VALUE: $250.3 billion



SECTOR: Communications

Rather than follow AT&T into the media and entertainment industries with splashy acquisitions, Verizon (VZ, $60.53) has remained mostly true to its core competency: wireless networks, which generate virtually all of its profits today.

The largest wireless service provider in America, Verizon has invested more than $126 billion since 2000 to not only meet rising demand for wireless data and video, but also to prepare its network for 5G technology. As a result of these investments, the telecom giant has been rated by RootMetrics as the best overall network in terms of reliability, data and call performance for 12 years in a row.

Verizon’s leading network performance and vast subscriber base, coupled with the industry’s mature nature and the high costs required to maintain a nationwide network, make it impractical for smaller upstarts to gain a foothold in the market.

As a result, Verizon generates predictable cash flow to continue funding its dividend, which it and its predecessors have paid without interruption for more than 30 consecutive years.

Combined with Verizon’s investment-grade balance sheet and payout ratio near 50%, the firm’s dividend should remain a safe bet going forward. In fact, Simply Safe Dividends even lists the firm as one of the best high-dividend stocks.

Healthcare Trust of America

MARKET VALUE: $6.3 billion



SECTOR: Real estate

Healthcare Trust of America (HTA, $30.19) is one of the younger companies to make this list of the best retirement stocks to buy. The REIT was founded in 2006 and only went public in 2012, but Healthcare Trust of America is no slouch; the firm is the largest dedicated owner of medical office buildings in the U.S.

The firm focuses on owning properties that are located on or adjacent to the campuses of major healthcare systems. Medical practices have high demand for these locations because of their location and the high volume of patients that come through.

As a physician group becomes established in an area and builds a client base, it often grows more reluctant to relocate. As a result, HTA’s medical office buildings target tenant retention rates in excess of 80%, as well as annual escalators above 2.5% to support organic growth. No tenant accounts for more than 5% of rent either, providing nice diversification.

Looking ahead, Healthcare Trust’s cash flow should continue growing as U.S. healthcare expenditures increase with the aging population, creating higher demand for medical office buildings.

Coupled with the firm’s investment-grade balance sheet and reasonable adjusted funds from operations payout ratio just below 90%, the REIT’s dividend should remain safe for the foreseeable future.

Duke Energy

MARKET VALUE: $64.8 billion



SECTOR: Utilities

Regulated utility stocks often serve as a foundation in many retirement portfolios due to their defensive qualities, high dividends, and steady earnings. In fact, a number of utilities are included in the best recession-proof stocks highlighted by Simply Safe Dividends.

Duke Energy (DUK, $88.95) is no exception. The regulated utility provides electricity to 7.7 million customers and gas to 1.6 million customers throughout America’s Southeast and Midwest. DUK is an attractive utility in part because the areas it operates in have favorable regulatory and economic traits.

Morningstar senior equity analyst Andrew Bischof writes that Duke’s regulatory environment is supported by “better-than-average economic fundamentals in its key regions.” This helps the utility have constructive relationships with regulators, providing a healthy foundation for rate negotiations.

As a result of these strengths, Duke has profitably grown its business over the years. Based on the current slate of projects, management expects the company to generate 4% to 6% annual earnings growth through 2023.

Assuming everything goes as planned, Duke’s dividend likely will grow at a low-single-digit pace during this period and should remain secure given the firm’s reasonable payout ratio below 80% and its investment-grade credit profile.

The utility has paid dividends for 93 consecutive years – a track record that stands out among even the best retirement stocks. And Duke should have no problem continuing its impressive run.

Dominion Energy

MARKET VALUE: $67.7 billion



SECTOR: Utilities

Dominion Energy (D, $81.33) is a large regulated utility serving 3.4 million electric customers and 3.3 million gas customers across 18 states, primarily in Virginia, North Carolina and South Carolina.

Approximately 95% of Dominion’s operating income is generated from regulated or “regulated-like” activities, which provides more predictable earnings and reduces the company’s risk profile. Those qualities alone put Dominion among the best retirement stocks to buy in 2020 – the stock may provide stability in what could be a topsy-turvy election year.

Morningstar analyst Charles Fishman estimates that “wide-moat” businesses generate about 45% of the firm’s operating earnings. He also writes that the balance of earnings comes from regulated utilities that possess “some of the most constructive regulation and attractive growth potential in the country.”

Along with an investment-grade credit rating and $26 billion of growth capital planned to be deployed between 2019 and 2023, Dominion’s dividend should remain in good shape with potential to keep growing. In fact, Fishman expects D shares to deliver low single-digit annual dividend increases through 2023, which would mark 20 consecutive years of payout raises.


MARKET VALUE: $22.9 billion



SECTOR: Communications

Telus (TU, $37.99) is a rather unique telecom company in that it provides investors with both high current income and the potential to grow its dividend relatively quickly in the years ahead. Telus is a Canadian Dividend Aristocrat with 17 years of dividend growth under its belt, and management targets 7% to 10% annual payout hikes through 2022.

One of the largest telecom businesses in Canada, Telus generates about two-thirds of its EBITDA from providing wireless services. Wireline accounts for the rest of the business and includes high-speed internet, home phone and cable TV services.

Outside of home phones and cable TV, which is under pressure from cord-cutting, demand for telecom services is typically inelastic. For example, during the Great Recession, Telus’s revenue fell only 1%, according to data from Simply Safe Dividends.

Besides its defensive qualities, the telecom industry is also a good one for dividends due to its mature nature and high capital intensity, which makes it more difficult for new competitors to enter the market and steal subscribers.

That’s especially true in the company’s core wireless services market. Matthew Dolgin, an equity analyst at Morningstar, writes that Telus is one of only three major national competitors in wireless. He thinks “these three firms have solid moats that protect them from any current or future competition.” Combined, Telus, Rogers Communications (RCI) and BCE Inc. (BCE) are estimated to dominate about 90% of the market.

Simply put, Telus seems positioned to remain a solid cash generator and a dependable dividend payer. With an investment-grade balance sheet and a conservative payout ratio target of between 60% and 75% of free cash flow, Telus seems likely to remain high on most short lists of retirement stocks to buy.

Exxon Mobil

MARKET VALUE: $290.5 billion



SECTOR: Energy

Exxon Mobil (XOM, $68.65) boasts one of the most impressive track records in the energy sector. It has paid uninterrupted dividends for more than a century and increased its dividend for 37 consecutive years.

Argus analyst Bill Selesky notes that the energy giant continues to benefit from its diverse asset base and low cost structure, which has helped preserve the dividend despite volatile oil and gas prices over the years.

With a mix of oil & gas production, refining and downstream chemical businesses, Exxon’s integrated operations help stabilize the company’s overall results; when one division is weak, another is usually on more solid ground.

Exxon hopes to double down on its scale and efficiency advantages in the years ahead. Unlike other oil majors, the company plans to invest well more than $200 billion between 2019 and 2025 to potentially more than double its operating cash flow. Even if the price of oil falls to $40 per barrel, management expects cash flow to rise 50%.

Exxon’s ambitious capital spending plans have been met with skepticism by some investors, but management deserves the benefit of the doubt for now given the firm’s solid capital allocation track record. XOM’s dividend should remain safe, too, and the payout’s growth potential should improve if everything goes well.

W.P. Carey

MARKET VALUE: $14.0 billion



SECTOR: Real estate

W.P. Carey (WPC, $81.44) has amassed a portfolio of more than 1,200 properties spanning industrial, warehouse, office, retail and self-storage markets across America and Europe, making it one of the most diversified REITs.

More than 300 tenants across America and Europe rent the firm’s properties under long-term lease agreements.

WPC enjoys stable cash flow as a result of its diversification (top 10 tenants only generate about 23% of rent; no industry greater than 20%), long-term lease agreements (average length remaining of 10.3 years), ownership of properties that are essential to tenants’ operations (occupancy above 96% since 2007) and contractual rent increases (present in 99% of leases).

Coupled with an investment-grade credit rating and a reasonable payout ratio near 80%, W.P. Carey has strong potential to continue increasing its dividend, which it has done every year since 1998.


MARKET VALUE: $29.3 billion



SECTOR: Energy

Oneok (OKE, $70.83) owns nearly 40,000 miles of pipelines moving natural gas and natural gas liquids for energy producers, processors and end users. The company’s footprint spans some of the biggest and most critical shale formations in the country, such as the Permian Basin in Texas and Bakken Shale in North Dakota.

Oneok’s infrastructure basically connects America’s energy supply with worldwide demand, benefiting from growth in U.S. gas production. However, only about 15% of the company’s earnings are directly affected by commodity prices. About 85% of the firm’s profits are from fee-based contracts, resulting in stable cash flows. That’s what separates companies such as Oneok from other energy plays like exploration-and-production companies and oil-services firms, which can sway based on the direction of oil and gas prices. And that’s why OKE and other pipeline companies are among the best retirement stocks to buy in 2020.

Oneok also boasts an investment-grade credit rating, double-digit EBITDA growth expected in 2020, and a nearly 70% payout ratio of its distributable cash flow (DCF, a frequently used profitability metric for pipeline companies). Thus, the dividend looks secure, and it should continue rising as management executes on growth projects. In fact, ONEOK targets annual dividend growth of 9% to 11% through 2021 with expectations to maintain dividend coverage of at least 1.2 times while also further strengthening its balance sheet.

And since ONEOK is a corporation rather than an MLP, income investors can own the stock without extra tax complexities or organizational risks such as simplification transactions.

National Health Investors

MARKET VALUE: $3.6 billion



SECTOR: Real estate

National Health Investors (NHI, $81.27), which incorporated in 1991, is a diversified healthcare REIT with more than 200 properties. Senior housing generates about two-thirds of the firm’s revenue, with skilled nursing and medical office buildings accounting for the remainder. A group of 36 operators use these properties, and none account for more than 20% of revenue.

Senior housing’s main appeal among investors seeking out retirement stocks is the long-term demand growth expected from America’s aging population. People need a place to live as they age out of their homes, and National Health’s facilities provide a solution for care.

In these markets, however, tenants often have lower coverage ratios compared to other parts of healthcare, and skilled nursing service providers usually earn a lot of their revenue from government-funded reimbursement programs such as Medicare.

National Health Investors has navigated these challenges by diversifying its portfolio and focusing on private-pay senior housing properties. By focusing on higher-quality tenants, the firm has grown its FFO per share faster than its peers over the last five years.

Management also maintains low leverage on the balance sheet and a conservative payout ratio below 80% of FFO, helping ensure that the dividend remains safe no matter how the senior housing and skilled nursing industries trend in the short term.

Pembina Pipeline

$17.7 billion



SECTOR: Energy

Pembina Pipeline (PBA, $34.51) has rewarded income investors with uninterrupted monthly dividends since its IPO in 1997. The Canadian transportation and midstream service provider has served North America’s energy industry for 65 years.

Pembina’s pipelines, processing plants, storage facilities and other energy infrastructure are concentrated in western Canada and span several basins. And it ranks among the best retirement stocks for 2020 for much the same reason as Oneok: While the energy industry is known for its volatility, Pembina generates nearly 90% of its adjusted EBITDA from fee-based contracts, resulting in predictable cash flow.

In 2019, the firm’s dividend consumed less than 80% of its fee-based distributable cash flow, providing a healthy margin of safety. The dividend also is protected by management’s focus on quality energy producers; about 85% of Pembina’s credit exposure is from investment-grade and secured counterparties.

Combined with Pembina’s BBB credit rating and ability to self-fund its growth projects rather than rely on fickle equity markets, PBA seems poised to continue delivering safe, growing dividends for years to come.


MARKET VALUE: $278.3 billion



SECTOR: Communications

AT&T (T, $38.10) has long been a favorite among retirement stocks because of its stable telecom business. But over the past few years, it transformed its business into a media conglomerate by acquiring DirecTV and Time Warner. The company now boasts more than 370 million direct-to-consumer relationships across its wireless, video and broadband businesses.

Management sees potential to leverage the firm’s media and telecom assets to create more valuable customer relationships, improve churn, develop successful streaming services and build a sizable advertising marketplace.

What’s more certain is that AT&T’s various businesses generate excellent cash flow thanks to their large subscriber bases, recurring revenue and economies of scale. In fact, AT&T expects to generate $28 billion of free cash flow in 2020 and expects its dividend to consume less than 50% of free cash flow in 2022.

The company’s net-debt-to-adjusted-EBITDA leverage ratio should fall to 2.5 by the end of 2019 – a healthy improvement that should help AT&T maintain its investment-grade credit rating. The dividend should remain on solid ground as a result.

That payout, by the way, has grown without interruption for 35 years. However, the pace of those hikes has been moderate. Nonetheless, this Dividend Aristocrat should provide high-yield investors with steady income as it continues evolving its business for the future.

Main Street Capital

MARKET VALUE: $2.7 billion



SECTOR: Financials

An internally managed business development company (BDC), Main Street Capital (MAIN, $42.81) invests in private debt and equity issued by lower middle market companies that typically have revenues between $10 million and $150 million.

Investment performance often is tied to the health of the economy, so managing risk is critical to Main Street’s ability to generate reliable cash flow over a full economic cycle.

Fortunately, management has proven to run the business conservatively, as demonstrated by Main Street’s BBB investment-grade rating from Standard & Poor’s and the firm’s track record of paying uninterrupted dividends since its IPO in 2007.

The company employs conservative diversification practices to improve the stability of its cash flow. For example, no portfolio company represents more than 5% of the firm’s total investment income nor exceeds 3% of its total portfolio fair value. Similarly, no industry is greater than 10% of the portfolio’s cost basis.

BDCs can be riskier investments during recessions – as explained in Simply Safe Dividends’ guide to investing in business development companies. Nonetheless, Main Street’s discipline and conservatism seem likely to keep the stock a safe bet for retirement income.

Enterprise Products Partners LP

MARKET VALUE: $57.2 billion



SECTOR: Energy

Enterprise Products Partners LP (EPD, $26.13) has long been one of the most reliable master limited partnerships (MLPs) and one of the best retirement stocks you can buy. The owner and operator of gas and oil pipelines, storage facilities and processing plants has increased its distribution for more than two decades thanks to the steady nature of its business model and management’s conservatism.

About 85% of Enterprise’s gross operating margin is derived from fee-based activities rather than volatile commodity prices. Meanwhile, the firm eliminated its incentive distribution rights in 2002, enjoys one of the highest credit ratings of any midstream business, and maintains a very conservative distribution coverage ratio of 1.7.

While some MLPs have gotten tripped up financing their capital-intensive growth projects and generous payouts, Enterprise has taken steps to de-risk its funding. Specifically, rather than rely on issuing new units to raise capital, the firm in 2019 began self-funding the equity portion of its capital investments. It did this by retaining more internally generated cash flow and running the business with less leverage.

For income investors who are willing to accept some of the complexities that come with investing in MLPs, Enterprise appears to be one of the better bets.

Magellan Midstream Partners LP

Tank oil in the refinery at night, thailand.

MARKET VALUE: $13.4 billion



SECTOR: Energy

Magellan Midstream Partners LP (MMP, $58.88) owns and operates midstream infrastructure in America, transporting, storing, and distributing petroleum products. The partnership’s profits are derived from refined products (59% of 2018 operating margin), crude oil (34%), and marine storage (7%).

With nearly 10,000 miles of pipelines, more than 50 terminals, as well as various storage facilities, Magellan boasts the longest refined petroleum products pipeline system in the country.

This business model generates reliable cash flow. Fee-based activities that are insensitive to volatile commodity prices comprise about 85% of Magellan’s operating margin. As a result, the partnership has paid higher distributions every year since 2001.

Management’s conservatism should ensure the distribution remains safe and growing. In addition to maintaining one of the highest credit ratings (BBB+) of any MLP, Magellan has minimal dependence on equity markets to fund its growth projects. Impressively, Magellan has issued equity just once in the last decade.

As domestic energy production rises and creates a long-term need for more infrastructure, Magellan seems likely to have profitable opportunities to expand. As cash flow rises and firm lives within its conservative 1.2x coverage ratio target, Magellan’s distribution should see continued growth as well. That should keep it among the highest-yielding retirement stocks to buy in 2020 and beyond.

Author: Brian Bollinger

Source: Kiplinger: 20 Best Retirement Stocks to Buy in 2020

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