7 Great Stocks to Buy for an Income-Rich Retirement

Just because we hit retirement, doesn’t mean we’re making a total shift to bonds. There are still stocks to buy that are both interesting and profitable. But more times than not, investors at that stage are looking for some income.

That involves a lot more than just screening dividend stocks and sorting by yield.

Investors need to know what they’re buying, as we need to have dependable income in this scenario. We don’t want all of our eggs in one basket, but we don’t want to be spread too thin either.

With that in mind, let’s look at seven dividend stocks to buy that could be solid candidates for those in or nearing retirement.

  • 3M Co (NYSE:MMM)
  • Lowe’s (NYSE:LOW)
  • Realty Income (NYSE:O)
  • Federal Realty (NYSE:FRT)
  • AT&T (NYSE:T)
  • Johnson & Johnson (NYSE:JNJ)
  • Walmart (NYSE:WMT)

Now, let’s dive in and take a closer look at each one.

Income Stocks to Buy: 3M Co (MMM)

3M (MMM) logo on top of a corporate building

Source: JPstock / Shutterstock.com

When we look for retirement income, we look for consistency, right? Well, 3M Co may not be the most exciting stock in the market — or even on this list — but it’s dividend sure is attractive.

The stock still pays out a 3.2% dividend yield, which is pretty solid in an era of ultra-low interest rates and when many dividend stocks are languishing in the 1% to 2% yield area.

In February, the company gave a 1% boost to its quarterly dividend. While many may scoff at this minor bump, consider that it comes at a difficult time amid global uncertainty. It also marks 3M’s 63rd-consecutive year with a dividend increase. Furthermore, “3M has paid dividends to its shareholders without interruption for more than 100 years.”

3M hasn’t kept pace with the S&P 500 so far this year, up just 4.4% in 2021. However, while the index is near its highs, 3M stock is down about 10% from its high in May and is testing back into its breakout area near $180.

With the dip, it may be a reasonable buy for income stocks.

Lowe’s (LOW)

the front of a Lowe's store

Source: Helen89 / Shutterstock.com

Like 3M, Lowe’s is dependable when it comes to dividends. In May, the board approved a whopping 33% increase to the payout. Despite the bump though, shares pay a yield of just about 1.6%.

That’s something investors sacrifice with Lowe’s. While the company’s business is strong, cash flows are impressive and the dividend is dependable, we don’t have too much in the way of yield. When building a portfolio of dividend stocks to buy, though, the dependability outweighs the payout, in my opinion.

According to the company, “Lowe’s has paid a cash dividend every quarter since going public in 1961, and it has increased the dividend for more than 25 consecutive years.”

The company’s bottom line is doing well, too. Despite estimates calling for revenue growth of less than 4% this year and 2% next year, earnings expectations call for 28% and 8% growth in 2021 and 2022, respectively.

That should continue to pad the dividend. Not to mention, the stock has been on fire, up 27.2% this year.

Income Stocks to Buy: Realty Income (O)

a wooden house shape holds 3 bags of cash representing reits to buy

Source: Shutterstock

The selloff we experienced in March 2020 was scary and rattling. Not only was the stock market in free fall, but the global economy was facing an abrupt disruption like it’s never seen before. Combined with a global pandemic and things were pretty scary!

It dealt a violent blow to REITs, as investors feared companies wouldn’t be able to pay their rent on time — if at all. That’s why Realty Income fell more than 50% inside of a month, far more than the peak-to-trough decline we saw in the S&P 500.

Here’s the thing.

Not only does Realty Income pay a juicy yield of almost 4.2%, but it’s one of the most dependable dividend stocks out there. Yet, despite this, REITs have been washed out and investors don’t seem to have any desire to get back in.

Realty Income is up just 7.7% over the past 12 months and is up 15.6% including dividends. That compares to the 31.5% and 33.9% return in the S&P 500 during the same stretch, respectively. But check this out.

Realty Income has paid 614 consecutive monthly dividends (more than 51 years) and has raised its dividend in 95 straight quarters (almost 24 years). The company also has 111 dividend increases since it went public in 1994.

So, if you’re looking for an income stock, this one is tough to beat.

Federal Realty (FRT)

a person in a suit holds a tiny house to represent reits to buy

Source: Shutterstock

Like Realty Income, Federal Realty has been hit hard since the Covid-19 selloff. Shares fell almost 55% before bottoming and like Realty Income, it has yet to eclipse the pre-coronavirus highs. There aren’t many high-quality stocks that have failed to do this, leaving some potential share price appreciation in play with this one.

Until then though, we can count on the yield. Federal Realty pays out a 3.5% dividend yield, but this name is considered a blue-chip holding in the space.

Throughout 2020, it was possible to buy FRT stock with a dividend yield north of 5%. At some points, it was as high as 6%. Now at about 3.5%, it’s not as high, but that doesn’t mean it’s not a good bargain.

The highest yield FRT hit in the previous 10 years was 3.6% in 2018 (with the exception of 2020). Before that, over 3% wasn’t easy to come by and even sub-2.5% wasn’t too uncommon.

Now for the fun stuff. Federal Realty just raised its dividend for the 54th-consecutive year. According to the company, that’s “the longest record of consecutive annual dividend increases in the REIT sector.”

Moreover, the company just raised its full-year 2021 and 2022 guidance for earnings per share and funds from operations (FFO; the main measure of bottom-line performance for REITs). That’s to go along with steady high-single-digit revenue growth expectations for this year and next year.

So for those looking for steady and dependable dividends, it’s really hard to beat the one-two punch of FRT and O.

Income Stocks to Buy: AT&T (T)

AT&T (T) logo on wooden background

Source: Lester Balajadia / Shutterstock.com

AT&T is a bit more controversial when it comes to dividend stocks for retirement. That’s because the stock has been an enormous laggard, plain and simple. Furthermore, while shares pay a 7.6% dividend yield, the upcoming split of the company is going to disrupt that payout.

Not that it’s a huge selling point, but consider this. Over the last 10 years, AT&T stock is down 1.7%. However, including dividends, the stock’s total return is 72.5%. While that’s still dwarfed by the S&P 500’s return of 276%, those dividends still help offset quite a bit of pain.

AT&T is going through a pretty big move, though. The company is acquiring Discovery (NASDAQ:DISCA), spinning off its media businesses and reducing its dividend payout from $15 billion to $8 billion.

A dividend cut: that’s never what investors want to hear. However, the reality is that the company’s move to acquire WarnerMedia was tremendous and gave AT&T a huge opportunity in the streaming world with HBO. The other reality is that Warner was responsible for a ton of AT&T’s free cash flow, and maintaining that dividend just isn’t realistic without this cash flow.

The good news is that AT&T stock will still have a juicy yield (around 4.5% at its current rate and price) and investors will own a chunk of the new entity. Hopefully the latter stock will generate some of the returns that are justified, particularly when we look at Disney (NYSE:DIS), Netflix (NASDAQ:NFLX) and other streaming giants.

Johnson & Johnson (JNJ)

A red Johnson & Johnson (JNJ) sign hangs inside in Moscow, Russia.

Source: Alexander Tolstykh / Shutterstock.com

A stalwart in the healthcare sector, Johnson & Johnson has become a giant over the years. It’s the 11th-largest company in the U.S. by market capitalization and while we don’t see some of the gains that we do in the tech sector, J&J delivers plenty of consistency.

The stock currently yields about 2.6% and the company has raised that payout in 59-consecutive years. That came in April when J&J delivered a 5% boost and it follows last year’s 6.5% increase.

Keep in mind, J&J raised the dividend amid extreme uncertainty in April 2020. That was a nod of confidence from management, effectively telling investors not to worry about the company’s strength even amid difficult times.

While its vaccine hasn’t been the most robust option available, Johnson & Johnson is still involved in the fight against Covid-19. Beyond that, it has plenty of options in the marketplace, ranging from at-home consumer care (like Tylenol and Band-Aids) to hospital equipment and pharmaceuticals.

Income Stocks to Buy: Walmart (WMT)

Walmart (WMT) sign on front of Walmart store at sundown

Source: fotomak / Shutterstock.com

While Amazon (NASDAQ:AMZN) is trying to catch up, Walmart remains the country’s largest company by employee count, with more than 2.3 million people on its payroll.

Just as investors thought Amazon was prepped for world domination (and may still be), Walmart fought back with an e-commerce strategy of its own. The retailer’s combination of online, brick-and-mortar, and order-online-and-pick-up sales has cemented itself among the retailers that are surviving this new wave of commerce.

In fact, Walmart is doing more than surviving — it’s thriving.

Shares are up almost 53% in the last three years. Including the dividend, those gains swell to 62.5%. Over the last five years, those gains sit at 98% and 127%, respectively. Not bad for a slow-growth dividend stock, right?

Despite somewhat stagnant revenue forecasts, analysts believe Walmart’s earnings will grow more than 15% this year. While it yields just 1.5%, management’s increase of the payout earlier this year was the company’s 48th-consecutive year of doing so.

On the date of publication, Bret Kenwell held a long position in O. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

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