The conventional approach to funding retirement is to withdraw 4% of your savings in the first year, followed by "pay raises" in each subsequent year to adjust for inflation. Over a 30-year retirement, the thinking goes, there is little chance of running out of money if this retirement portfolio is invested in a mix of dividend stocks, a few growth stocks and bonds.
Today's world is different. Interest rates and bond yields have never been this low for this long, reducing future expected returns. And Americans are living longer than ever before.
Instead of facing the uncomfortable decision of what securities to sell or wondering if you are at risk of outliving your savings, you can lean on the cash from dividend stocks to fund a substantial portion of your retirement. Simply Safe Dividends published an in-depth guide about living on dividends in retirement here.
Many companies in the market yield 4% or more. And unlike with the 4% withdrawal rule, 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, you'll have a chance to leave your heirs with a sizable portfolio when the time comes.
Here's a look at 20 quality dividend stocks, yielding roughly 4% or higher, that should fund at least 20 years of retirement, if not more. They have paid uninterrupted dividends for more than 20 consecutive years, appear to have secure payouts and have the potential to collectively grow their dividends to protect investors' purchasing power.
Market value: $234.5 billion
Dividend yield: 6.2%
AT&T (T, $32.26) is featured on Simply Safe Dividends' best high-dividend stocks list and has paid a higher dividend for 34 consecutive years. 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 170 million direct-to-consumer relationships across mobile, internet and TV.
AT&T hopes to bundle 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 payout ratio to sit near 60% in 2018, including all Time Warner integration costs. AT&T also believes it will return to historical leverage levels by year-end 2022.
While AT&T's pace of dividend growth will remain very moderate during this period, the stock's high yield provides income investors with some nice compensation as the business digests its recent deals and works on evolving for the future.
Tanger Factory Outlet Centers
Sector: Real estate
Market value: $2.2 billion
Dividend yield: 5.9%
Tanger Factory Outlet Centers (SKT, $23.64) is a real estate investment trust (REIT) that was founded in 1981 and owns 44 outlet centers across the U.S. and Canada. Its store locations are leased to hundreds of primarily high-end retailers such as Tapestry (TPR) brand Coach, Michael Kors (KORS) and Ralph Lauren (RL), and no single retailer accounts for more than 7% of rent.
Tanger admittedly is one of the more controversial companies on this list. With the unabated rise in online shopping, many investors wonder what need brick-and-mortar malls will fill in the future.
However, the aforementioned retailers offer significantly discounted merchandise at Tanger's outlets that are difficult to find elsewhere. Also, management's focus on quality tenants and a premium customer experience have helped Tanger end each year since its 1993 IPO with an occupancy of 95% or greater. So it appears to be more protected than others against the creep of online shopping.
While the REIT has seen a small dip in same center net operating income growth thus far in 2018, management runs the business very conservatively. Tanger maintains an investment-grade credit rating and has delivered a higher dividend each year since 1993.
Per Simply Safe Dividends, the REIT's adjusted funds from operations (AFFO) payout ratio is expected to sit near 75% over the next year, which provides reasonable financial flexibility to continue maintaining and moderately growing the payout.
For contrarian income investors, Tanger is an idea to consider.
MORE FROM SIMPLY SAFE DIVIDENDS: An In-Depth Guide to REIT Investing
Market value: $61.5 billion
Dividend yield: 5.7%
Enbridge (ENB, $35.88) offers a rare combination of yield and growth, at least for the next few years. The midstream energy company sports a dividend yield above 5%, and Morningstar equity analyst Joe Gemino, CPA, expects Enbridge "to easily meet its 10% average annual dividend growth target through 2020 and maintain a healthy distributable cash flow ratio of 1.4 times the forward dividend."
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.
Sector: Real estate
Market value: $23.4 billion
Dividend yield: 5.5%
The long-term outlook for health-care-focused real estate is tantalizing. Kevin Brown, an equity analyst at Morningstar, notes that the "80-and-older population, which spends more than 4 times on healthcare per capita than the national average, should almost double over the next 10 years."
Welltower (WELL, $63.14) is strongly positioned to capitalize on this trend. The real estate investment trust owns over 1,200 health-care properties spanning everything from hospitals and skilled nursing facilities to medical office buildings and senior housing.
The business is managed conservatively. Besides its property diversification, Welltower maintains an investment grade credit rating and deriving over 90% of its rent from private pay sources, rather than depending on Medicare and Medicaid reimbursements which can fluctuate due to regulatory changes.
Management's disciplined strategy has enabled Welltower to pay uninterrupted dividends since 1971, and that trend seems likely to continue given the industry's long-term prospects.
Market value: $46.8 billion
Dividend yield: 5.2%
Regulated utilities are a cornerstone of many retirement portfolios due to their generous dividends, recession-resistant business models and predictable growth.
Southern Company (SO, $46.13) 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 due to 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.
In May 2018, Southern announced it would sell two of its smaller utility subsidiaries for approximately $6.5 billion to strengthen its balance sheet and solidify its investment-grade credit rating.
By focusing on its core utility operations, management expects stronger projected earnings per share growth within its 4%- to 6%-per-year target range. When combined with the company's payout ratio near 80%, which is reasonable for a regulated utility, Southern is positioned to continue rewarding shareholders with generous, moderately growing dividends.
Market value: $45.7 billion
Dividend yield: 4.7%
Dominion Energy (D, $70.69) targets 10% dividend growth in each of 2018 and 2019, and 6% to 10% growth in 2020, making it one of the best ideas for fast-growing income on this list.
The company is one of the largest generators and transporters of energy in the country and has paid uninterrupted dividends for over 80 years. However, the utility has undergone some meaningful changes in recent years.
Since 2010, Dominion "has focused on the development of new wide-moat projects with conservative strategies, exited the exploration and production business, sold or retired no-moat merchant energy plants, and made significant investments in moaty utility infrastructure," Morningstar equity analyst Charles Fishman, CFA, writes.
In other words, the business has become even more resilient. In fact, Fishman expects wide-moat businesses to account for about half of Dominion's operating earnings by 2020, up from 30% in 2016.
Dominion Energy also boasts an investment-grade credit rating, which provides it with financial flexibility to pursue opportunistic growth projects. Most recently, that flexibility has enabled Dominion to pursue an acquisition of Scana (SCG), a distressed regulated utility.
While a decision by regulators it not due until the fall, the merger agreement protects Dominion from any action that would "degrade" the original economic proposition of the merger. The firm's dividend should remain safe and growing.
SEE ALSO: How Well Do You Know Dividends?
Sector: Real estate
Market value: $16.4 billion
Dividend yield: 4.7%
Realty Income (O, $56.51) is a particularly appealing income investment for retired investors because it pays dividends every month.
Impressively, Realty Income has paid an uninterrupted dividend for 576 consecutive months, one of the best track records of any REIT in the market.
The company owns more than 5,400 commercial real estate properties that are leased out to more than 250 tenants - including Walgreens (WBA), FedEx (FDX) and Dollar General (DG) - operating in 48 industries. These are mostly retail-focused businesses with strong financial health, as 51% of Realty Income's rent is derived from tenants with investment-grade ratings.
Realty Income generates very predictable cash flow thanks to the long-term nature of its leases, which has fueled positive earnings growth in 21 of the past 22 years.
While e-commerce threatens many brick-and-mortar retailers, Morningstar equity analyst Brad Schwer notes that more than 90% of Realty Income's revenue "comes from tenants with non-discretionary, service-oriented, or low-price components to their businesses."
Simply put, Realty Income is one of the most dependable income growth stocks in the market. Investors can learn more from Simply Safe Dividends about how to evaluate REITs here.
Market value: $216.2 billion
Dividend yield: 4.5%
While AT&T has aggressively diversified its business into pay-TV and media content in recent years, Verizon (VZ, $52.47) has largely opted to stay focused on its core wireless services business.
Thanks to its investments in network quality, the company enjoys a market leading postpaid connections share above 40%. Verizon's massive subscriber base and non-discretionary services make it a reliable cash cow.
In fact, Verizon and its predecessors have paid uninterrupted dividends for more than 30 years. While the company's growth rate will never be impressive, the business - which with AT&T dominates telecommunications - should continue chugging along.
Specifically, U.S. tax reform and management's cost savings initiatives are freeing up cash for debt reduction to maintain the firm's investment-grade rating, and Verizon expects low-single-digit growth in adjusted earnings in 2018.
National Retail Properties
Sector: Real estate
Market value: $7.1 billion
Dividend yield: 4.5%
National Retail Properties (NNN, $44.91) has increased its dividend for 29 consecutive years. For perspective, only two other publicly traded REITs and 88 other public companies in America have an equal or longer dividend growth streak.
This REIT owns approximately 2,800 freestanding properties that are leased out to more than 400 retail tenants operating across over 30 lines of trade. No industry represents more than 18% of total revenue, and properties are primarily used by ecommerce-resistant businesses such as convenience stores and restaurants.
As a triple-net lease REIT, National Retail benefits from long-term leases with initial terms as long as 20 years. The firm's portfolio has not seen its occupancy dip below 96% since 2003, either - a testament to management's focus on quality real estate locations.
National Retail's dividend remains on solid ground. CFRA equity analyst Chris Kuiper, CFA, recently wrote that the firm seems likely to "continue to do well given its stable tenant base and broad diversification."
Market value: $335.3 billion
Dividend yield: 4.1%
Exxon Mobil (XOM, $79.42) has one of the most impressive dividend histories of any American company. The integrated oil conglomerate has not only paid an uninterrupted dividend for more than 100 years, but the firm has also raised its payout every year since 1983.
Despite the volatile nature of the energy sector, Exxon's disciplined capital allocation, conservative use of debt, and focus on complementary business units have made the stock a very reliable source of income over the years.
While the oil price cash forced many of Exxon's peers to cut back on spending and return more cash to shareholders, Exxon is pursuing a rather ambitious growth plan that management expects could double the company's earnings by 2025.
Specifically, Exxon plans to spend around $200 billion between 2018 and 2025 to significantly increase its upstream production and chemical production while improving returns on invested capital across each of its business segments.
Importantly, even if the price of oil heads much lower - say, to $40 per barrel - Exxon expects its plans to still generate meaningful growth in free cash flow. Simply Safe Dividends recently analyzed Exxon's plans and what they mean for the company's dividend.
If successful, and management deserves the benefit of the doubt, Exxon shareholders should continue enjoying a steadily rising dividend, including the 6.5% payout raise Exxon announced earlier this year.
SEE ALSO: 5 Energy Stocks With 100% Street Support
Sector: Consumer discretionary
Market value: $2.2 billion
Dividend yield: 4.4%
Meredith Corporation (MDP, $49.70), which has been in business for more than 115 years, is a diversified media company that provides consumer with content across various television stations, websites, online applications and magazines such as Better Home & Gardens, Parents, and Martha Stewart Living.
The business primarily makes money through paid subscriptions and both digital and print advertising. Meredith has long been a cash cow, enabling it to pay a continuous quarterly dividend since 1947 while raising its payout for 24 consecutive years.
However, today the media world is changing faster than ever before. Advertisers are moving away from traditional channels, such as print, and allocating a greater share of their spending on digital media.
To help its business model evolve, in 2017 Meredith acquired Time Inc. for $2.8 billion. The combined company generates 35% of its ad revenues from high-margin digital sources and is the No. 1 owner of premium national media brands. Meredith sees opportunity to substantially improve the profitability of Time Inc.'s media assets.
Merger integration work is progressing well, cost synergies remain on track, Meredith is paying down debt and management remains committed to the dividend.
Sector: Consumer staples
Market value: $1.4 billion
Dividend yield: 5.3%
Universal Corporation (UVV, $56.20) boasts an impressive track record of paying increasing dividends without interruption for 47 consecutive years. The company has focused on supplying tobacco leafs to manufacturers of tobacco products since its founding in 1918.
Universal is the dominant supplier of the flue-cured and burley tobacco that is grown outside China. In fact, annual production of such tobaccos handled by Universal is 30%-40% in Africa, 15%-25% in Brazil, and 30%-40% in the U.S.
Tobacco products manufacturers have little choice but to work with Universal tobacco, providing a steady flow of demand. Little capital is required to maintain Universal's core business as well, resulting in very consistent free cash flow generation.
Combined with Universal's investment-grade credit rating and reasonable payout ratio, the company should have no trouble continuing its impressive dividend streak. In fact, management boosted Universal's dividend by 36% earlier this year in a sign of the team's confidence in the firm's ongoing cash flow generation.
SEE ALSO: 7 Dividend ETFs That Do It Differently
Sector: Consumer staples
Market value: $26.7 billion
Dividend yield: 4.3%
Raw material inflation, rising transportation costs, private label competition and shifting consumer preferences for healthier meals have all weighed on the packaged food industry over the last year.
General Mills (GIS, $45.18) has not been immune from these headwinds, which have pushed its dividend yield above 4%. However, the company is doing its part to gradually diversify its operations and adapt. Specifically, management is investing more heavily in advertising and product innovation to rejuvenate profitable growth. While it is still early days, General Mills has now delivered three consecutive quarters of organic sales growth.
Morningstar equity analyst Sonia Vora also believes General Mills' higher investments "should help the firm launch new or reformulated products that better resonate with consumers and justify the value (and therefore pricing) of its offerings over private-label fare."
Besides in-house innovation, in early 2018, General Mills announced plans to acquire natural pet food company Blue Buffalo for $8 billion. This deal provided the firm with additional diversification in its product portfolio, but its price tag was steep.
Management expects to maintain the current dividend, which the company has paid without interruption for 119 years, but shareholders shouldn't expect much growth for the next couple of years as General Mills works on reducing its debt instead.
However, long-term income investors have an opportunity to lock in a relatively high yield today that should grow over time as General Mills improves the strength of its business.
International Business Machines
Market value: $130.7 billion
Dividend yield: 4.4%
Warren Buffett's Berkshire Hathaway exited its stake in International Business Machines (IBM, $144.48) earlier this year (investors can view Simply Safe Dividends' analysis on all of Buffett's dividend stocks here). However, the stock has some appeal for contrarian investors who are primarily interested in income.
For one thing, IBM has been paying dividends for more than 100 years, including 23 consecutive years of payout increases. The company still maintains a very strong investment-grade credit rating, and its payout ratio sits below 50%, suggesting the tech giant has a decent amount of financial flexibility.
Of course, the big issue is whether or not IBM can return to profitable growth. The company's legacy hardware and IT software businesses are cash cows, but they are in (gradual) decline, in part due to the rise of the cloud.
Management is investing in a number of "Strategic Imperatives" covering most of today's technology buzzwords: cloud computing, security, social, mobile and data analytics. However, these are extremely dynamic and competitive markets, so it will take some time to gauge IBM's level of sustained success.
The company's dividend seems likely to continue moderately growing during this time. After all, IBM's legacy businesses are indeed still cash cows and should be for a while.
Andrew Lange, equity analyst at Morningstar, put it well when he wrote, "Even with a lethargic core business, IBM remains entrenched within its large customer base. The firm's products and services are inherently sticky, given their often mission-critical nature, and we believe the company's brand premium precedes it."
Market value: $1.2 billion
Dividend yield: 4.3%
Schweitzer-Mauduit International (SWM, $40.03) is a little-known dividend stock that provides engineered solutions and materials for a number of different industries. The company has two business segments which are almost equal in size.
Its Engineered Papers business primarily sells cigarette papers and reconstituted tobacco leaf to cigarette and cigar manufacturers. While heat-not-burn technology has potential to replace a significant portion of lit cigarettes, Schweitzer-Mauduit actually supplies the material used in recon-based heat sticks.
The other business segment, Advanced Materials and Structures, makes resin-based films, nets, and other products used across a variety of filtration, construction, medical and industrial applications.
The company has focused more on diversification in recent years, increasing its mix of non-tobacco related sales from under 10% in 2013 to more than 50% today. Special materials businesses can be solid long-term investments given their focus on numerous profitable niches.
Schweitzer-Mauduit International has paid uninterrupted dividends since 1996 and last increased its payout by 2% in November 2017. With a payout ratio near 50% and excellent free cash flow generation, SWM seems like a dependable income stock for the foreseeable future.
Market value: $57.6 billion
Dividend yield: 4.6%
Duke Energy (DUK, $80.89) is about as steady as dividend growth stocks come. In fact, 2017 was the 91st straight year the regulated utility paid a cash dividend on its common stock.
The company services approximately 7.5 million retail electric customers across six states in the Midwest and Southeast, and Duke Energy also distributes natural gas to about 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 substantial growth plans over the next few years.
The company plans to invest $37 billion between 2018 and 2022 to expand its regulated electric and gas earnings base. If everything goes as planned, the utility expects to generate 4% to 6% annual EPS growth through 2022, which should drive a similar pace of dividend growth.
Argus analyst Gary Hovis is also bullish on Duke's plans, writing, "Due to the company's infrastructure improvement program, we expect above-average rate base growth over the next several years and view the company's sale of nonregulated generating assets in the Midwest as a strong positive."
Market value: $28.2 billion
Dividend yield: 4.8%
Oneok (OKE, $68.90) has been in business since 1906 and is a major midstream service provider with one the largest natural gas liquids (NGL) systems in the country. The company's pipelines, processing facilities and storage assets connect NGL supply with major market hubs.
Management has taken meaningful steps in recent years to improve the stability of the business. For example, approximately 90% of Oneok's earnings are generated from fee-based businesses today, up from just 66% in 2013 to help minimize its direct exposure to volatile commodity prices.
The company also maintains an investment-grade credit rating and targets a dividend coverage ratio greater than 1.2 times, which is fairly conservative for this type of business as well.
As management expands Oneok's infrastructure base over the years ahead to capitalize on growing North American energy production, the company believes it can reward shareholders with 9% to 11% annual dividend growth through 2021.
Simply put, Oneok appears to offer an attractive blend of income, growth and stability.
Monmouth Real Estate Investment Corporation
Sector: Real estate
Market value: $1.4 billion
Dividend yield: 4.0%
Monmouth Real Estate Investment Corporation (MNR, $16.92) was founded in 1968 and owns over 100 industrial properties. The firm rents out these locations under long-term leases to investment-grade tenants such as Coca-Cola (KO), FedEx, and National Oilwell Varco (NOV), who collectively account for 85% of Monmouth's revenue.
Monmouth properties are relatively new with a weighted average building age of under 10 years, and they are 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 26 consecutive years. Management last raised its dividend by 6.25% in October 2017, and with a 99.6% portfolio occupancy rate and growing funds from operations, shareholders should be in for continued income growth in the years ahead.
SEE ALSO: The 15 Best REITs for Retirement Income
Universal Health Realty Income Trust
Sector: Real estate
Market value: $946.4 million
Dividend yield: 3.9%
Universal Health Realty Income Trust (UHT, $68.98) is a healthcare real estate investment trust with 69 investments in a variety of hospitals, emergency departments, medical office buildings and childcare centers across 20 states.
The firm has increased its dividend each year since its founding in 1986 and started up by purchasing properties from Universal Health Services (UHS) which it then leased back under long-term contracts. UHS is a financially strong company that accounts for about 20% of Universal Health Realty Income Trust's revenue today.
Medical office buildings and clinics account for 74% of the firm's properties, which are less dependent on federal and state healthcare programs, reducing risk. As management continues focusing on high-quality areas of healthcare that will benefit from America's aging population, the stock's dividend should remain safe and growing.
Market value: $537.5 million
Dividend yield: 4.4%
Ennis (EBF, $20.55) has been in business for more than a century and has primarily grown through acquisitions to serve more than 40,000 distributors today. The company sells business products and forms such as labels, tags, envelopes and presentation folders.
While the world is becoming increasingly digital, Ennis has carved out a nice niche since 95% of the business products it manufactures are tailor-made to a customer's unique specifications for size, color, parts and quantities. No customer is greater than 5% of company-wide sales either.
Ennis is a cash cow that has paid uninterrupted dividends for more than 20 years. 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 three dividend raises in the last six years.
Most recently Ennis announced a 12.5% dividend increase in June 2018, reflecting its solid financial health. In fact, Ennis holds more cash than debt, and its net cash could sustain the current dividend for about three years.
Ennis will never be fast-growing company, but it offers a nice yield and should have opportunity to continue playing the role of consolidator in its market.
Brian Bollinger is long D, DUK, GIS, NNN, VZ and XOM.
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Copyright 2018 The Kiplinger Washington Editors