Top 5 Stocks for High Income in Retirement
A few days ago, I shared my “Top 3 Funds for Generating High Income in Retirement.” Those three funds pay an average annual distribution of roughly 8%, which in this market is about as good as you can hope to do.
Certainly, there are clear advantages to using exchange-traded funds (ETFs) for this purpose. They provide broad diversification and professional portfolio management. That means you don’t have to do any work at all if you’d prefer to have someone else do all that for you.
But some of us like following individual stocks, too. If nothing else, it gives us something constructive to do in retirement. Plus, you can compare your performance to the pros that manage the funds.
For that reason, I would supplement my fund holdings with a small number of high-yielding stocks. Of course, I would put the bulk of my money in funds to minimize volatility. But I’d also have a smaller amount in a handful of stocks such as the ones listed below.
Yes, Altria (NYSE: MO) makes most of its money selling cigarettes. And no, that doesn’t bother me so I would be happy to own it and collect its hefty 7% dividend yield. For what it’s worth, the company is making an honest effort to transition away from cigarettes towards non-combustible forms of tobacco consumption.
The coronavirus pandemic turned out to be a boon for Altria. Its share price had been falling steadily prior to March 2020. But severe social distancing restrictions drove cigarette consumption all over the world, buying the company much-needed time to implement its transition plan.
Although this real estate investment trust (REIT) became famous for providing underground storage vaults for priceless works of art and historical artifacts, Iron Mountain (NYSE: IRM) is pivoting towards more lucrative data center storage and blockchain generation facilities. So far, that strategy is paying off in spades. Since bottoming out below $25 last November, IRM has nearly doubled in value.
In addition, Iron Mountain’s most recent quarterly dividend payment of $0.6185 per share equates to a forward annual yield of 5%. After two years of holding its dividend payment steady at that rate, I believe the company’s board of directors will raise it next year. Cryptocurrencies are here to stay, and demand for the blockchain generation facilities that support them is growing faster than Iron Mountain can create them.
The oil industry is supposed to be dying out, right? The push for electric vehicles (EVs) is growing stronger every day. The only problem with that theory is that global demand for transportation is growing faster than the supply of EVs. That is why I believe that oil supermajor Chevron (NYSE: CVX) will be able to pay a high dividend for a long time to come.
According to the International Energy Agency, global demand for oil will grow steadily over the next five years. At the same time, the supply of oil is expected to grow at a slower rate. If those projections hold true, then Chevron’s 5.5% dividend yield should be safe regardless of how much hype you hear about EVs taking over the world.
If you asked someone to describe the ideal equity income play, their response would probably be a company that pays a high dividend yield while also offering share price appreciation equal to or greater than the overall stock market. At the moment, it would be difficult to find a business that meets that definition better than business development company (BDC) Hercules Capital (NYSE: HTGC).
Over the past year (through July 30), HTGC appreciated 58% compared to a 36% rise in the S&P 500 Index. In addition to outperforming the index by more than 20 percentage points, the 7.4% dividend yield paid by Hercules Capital is more than five times the 1.3% yield paid by the index.
At its annual Investor Day on March 10, Verizon (NYSE: VZ) laid out its plans to become the dominant 5G (fifth-generation telecommunications) provider. At the start of that presentation, the company’s CEO, Hans Vestberg, boasted, “This is a great day for Verizon. I would go so far as to say it’s one of the most significant days in our 20-year history.”
That may sound like hyperbole now, but the steps Verizon is taking to dominate the 5G transmission space will soon become reality. According to Vestberg, Verizon will “grow more than 3% for years to come, along with the strong earnings and cash flow generation.” That should allow Verizon to maintain its 4.5% dividend yield while pushing its share price higher.
I’ve just highlighted a quintet of solid stocks for retirement, but if you want to “turbocharge” your portfolio right now, consider the investment methods of my colleague Jim Fink.
As the chief investment strategist of Velocity Trader, Jim has developed four proprietary stock filters that provide advanced knowledge of when a stock price is about to rapidly accelerate. Based on this “secret” knowledge, Jim constructs trades that have consistently reaped for his followers.
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