When you think of a “retirement” stock, certain things come to mind. Retirees need income, so their portfolios tend to be chock full of dividend stocks.
They also tend to prefer stable, established companies over new and unproven up-and-comers. Growth is important, but safety and stability are more important. Leave the flashy growth stocks to the kids.
The outperformance of dividend stocks is not random. Paying a dividend forces company management to be more disciplined.
Every dollar paid out to investors is a dollar that isn’t retained in house, so management is forced to prioritize and, ideally, eliminate value-destroying empire building via acquisitions.
Here are 5 dividend stocks that will appeal to investors of all ages in my opinion.
Apple (AAPL)
Dividend Yield: 1.6%
Most of the recent buzz around Apple revolves around its release of the iPhone 8 and 8 Plus and the higher-priced iPhone X.
The market reaction was somewhat muted, in part due to a later-than-expected shipment date for the iPhone X. It also doesn’t help that many of the iPhone X’s new features (wireless charging, facial recognition, larger edge-to-edge screen, etc.) were liberally “borrowed” from Samsung and other Android makers.
That’s OK. Apple’s products haven’t truly “wowed” us in years. At this stage, Apple’s priority is making its iOS ecosystem stickier and further monetizing its users via service subscriptions.
In my opinion, this is something that Apple has been much more successful in implementing than Alphabet Inc (GOOGL) via its Android ecosystem.
Microsoft (MSFT)
Dividend Stocks: 2.1%
It wasn’t that long ago that Microsoft looked like a has-been on the slow road to irrelevance. The company missed the mobile revolution completely, leaving Apple and Alphabet to make it a two-horse race.
PC sales — which ultimately drive Windows licenses — have been in decline for years. With more and more computing happening on mobile devices, Microsoft appeared to be doomed.
But then, along came Satya Nadella, who upon taking over as CEO in 2014, refocused Microsoft as a cloud services company that is now rivaled by only Amazon.com, Inc.’s (AMZN).
The “mobile era” has been going on for over a decade now and shows no sign of slowing down. I have no reason to believe that Microsoft’s cloud business doesn’t have a long, profitable life in front of it.
And in the meantime, Microsoft will continue to be a dividend-paying machine in my opinion. Over the past 10 years, Microsoft has grown its dividend at a 15.7% annual clip.
Omega Healthcare (OHI)
Dividend Yield: 7.9%
What if you could get a high dividend yield and high dividend growth in the same stock?
Omega has raised its dividend every year since 2003… and for 20 consecutive quarters. Over the past 10 years, the REIT has raised its dividend at an annualized clip of 9.5% per year.
It also yields a sweet 7.9% at current prices.
OHI is a landlord specializing in skilled nursing and senior living facilities, and America is an aging country. And when you consider that the baby boomers are just now entering the stage of life where senior care is a need, there’s a lot more growth where that came from.
Enterprise Products (EPD)
Dividend Yield: 6.4%
In an industry dominated by shoot-from-the-hip cowboy capitalists, Enterprise Products is the proverbial tortoise that beats the hare.
Think back to the crude oil rout in 2015. In the chaos that ensued, Kinder Morgan Inc (KMI) had to slash its dividend and Energy Transfer Equity LP (ETE) had to worm its way out of a merger with Williams Companies Inc (WMB) that left both companies battered.
Yet Enterprise Products kept right on trucking. By keeping its debt load manageable and by not over-promising on dividends, EPD managed to win by not losing.
Vanguard Dividend Appreciation ETF (VIG)
Dividend Yield: 2.2%
In my view, this ETF is a solid option both as a one-stop shop for dividend growth and as a pre-scrubbed list for individual dividends.
To be included in the Vanguard Dividend Appreciation ETF, a stock must be a bona fide dividend achiever. This means it has to have raised its dividend for a minimum of ten consecutive years.
In my view, 10 years is a long enough timeframe to have included a full economic cycle — a boom, a bust, and everything in between — but it’s still short enough to include relatively young companies.
Photo Credit: Pictures of Money via Flickr Creative Commons
Charles Lewis Sizemore, CFA is the principal of Sizemore Capital Management, a registered investment advisor based in Dallas, Texas. As of this writing, he was long AAPL, OHI, EPD, KMI, ETE and VIG.
