With President Donald Trump into his first month in office, it's time for investors to focus on how to navigate what likely will be a bumpy investing road -- certainly this year, but potentially for years to come.
Indeed, possible changes to Wall Street rules and regulations (including Glass-Steagall), re-negotiations of trade agreements (including the long-established NAFTA pact, or outright cancellation of newer agreements like TPP) and an America-focused trade policy will shape the way investors peer into their investment crystal balls.
What always will matter for investors -- particularly those planning for retirement -- is building a portfolio that includes no-brainer dividend stocks that can stand the ups and downs of the markets.
Picking winners and losers for the next few months will be fraught with uncertainty. My advice? Focus on things like balance sheets, cash flows, dividend hike histories and diversification. That'll provide you with a solid base for the future.
As a note: These dividend stocks don't come with screamingly high yields, and instead sit around the 3%-4% area. That's because what we're looking for here is good dividend yield, but excellent dividend quality. Plus, in most of these cases, there's room for dividend growth, which will improve your yield on cost over time.
Here's a look at five safe dividend stocks that fit our retirement needs:
Prices and data are from the original InvestorPlace story published on February 1, 2017. Click on ticker-symbol links in each slide for current prices and more.
Coolcaesar via Wikipedia
Dividend yield: 3.5%
Cisco Systems, Inc. (CSCO) continues to be virtually eponymous with routers, switches, and integrated networks.
The problem is, those businesses are waning.
Cisco didn't have a smooth recovery coming out of the financial crisis, though management did manage to right the ship starting around 2012. That said, revenues have been mostly flat thanks to its aging legacy businesses.
Nonetheless, Cisco is primed for strong growth thanks to moves well beyond its roots, including in the internet of things.
Cisco's dividend is relatively fresh, having started in 2011 at 6 cents per share. Now, the dividend stands more than quadruple that at 26 cents, good for a yield well north of 3%. And given that CSCO still pays out less than half its profits in earnings, you can expect Cisco to keep hiking its dividend -- albeit, maybe not as aggressively as it has in the past half-decade.
Also reassuring is just under $70 billion in cash and short-term investments, which it can use to make deals like its recent $3.7 billion buyout of AppDynamics.
Cisco's flat revenues aren't reassuring, but earnings are expected to grow this year and next, and Wall Street even expects a modest 2% uptick in revenues next year, so that's something.
Also, CSCO trades at just 12.3 times forward earnings. That's just less than International Business Machines Corp. (IBM), and a couple points under Oracle Corporation (ORCL). And both of those dividend stocks don't have Cisco matched for yield right now.
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Dividend yield: 3.8%
Well, if nothing else, Consolidated Edison, Inc. (ED) gets my mom's stamp of approval: She has owned the dividend stock in her retirement portfolio since 1980.
ConEd primarily serves New York City and most of its northern suburbs, and has been around since 1832. Today it delivers gas, electric and steam service (think radiators) to more than 10 million customers, generating nearly $13 billion in revenue for 2016.
New York and its suburbs continue to grow in population, housing starts are up, NYC is still home to a multitude of corporate headquarters locations, and tourists still flock to the Big Apple in droves. But ConEd isn't simply resting on what the New York area has to offer.
To start, ConEd is working to find ways to produce cleaner energy that costs less for it to produce, like a customer-centric program in Brooklyn and Queens that's helping to provide customers with incentives to lower costs instead of needing to build a $1 billion substation. ConEd is also building out an Advanced Metering Infrastructure program -- a smart meter technology that will help identify local power generation problems and possible power outages more quickly for customers, allowing ConEd to administer services more quickly.
What ConEd lacks in size -- for comparison, Duke Energy Corp. (DUK) runs at about $23b per year -- it makes up for in steady net income of just over $1 billion per year over the past few years, and grown profits for the past three years. Steadier still is ED's operating cash flow of over $3 billion -- a tidy sum considering its $12 billion in revenue.
ED's payout ratio is nearly 65%, but for a utility company, that's not terribly high. Southern Co. (SO) and Duke Energy clock in above 80%. So ConEd has a bit more room to improve its dividends. Indeed, Consolidated Edison has increased earnings for 42 consecutive years, including a 3% hike recently to 69 cents quarterly.
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Dividend yield: 2.9%
Defense is one of President Trump's biggest areas of focus, and Lockheed Martin Corporation (LMT) is ... well, it's a solid bet for the years ahead, despite what the headlines might indicate.
This global aerospace and security giant operates within five segments, including Aeronautics, Information Systems & Global Solutions (IS&GS), Missiles and Fire Control (MFC), Mission Systems and Training (MST) and Space Systems. Lockheed's diversity of product offerings and industries provides the ability to weather some difficult times.
With programs that run the gamut from helicopter and fighter jets to advanced material manufacturing, Lockheed's $46 billion business model is set to cushion the possible blow of lowering the price of its signature F-35 jet after President Trump jaw-boned CEO Marillyn Hewson on the cost of the program.
But that's not the only program in the Lockheed portfolio, and Lockheed is far from a company hoping to hold on to the past and hope for the future. Its most recent blockbuster move was the purchase of United Technologies (UTX) Sikorsky Helicopter division in 2015 -- a move once thought foolish but that has panned out big-time for LMT.
LMT is also knee-deep in one of the biggest growth sectors in the tech sector: cybersecurity. Lockheed technology is everywhere, from building firewalls for commercial users to national security.
On the dividend front, LMT has raised its dividend for 14 consecutive years, and those haven't been meager upticks. Lockheed's quarterly payout has grown 82% in just the past five years alone.
If President Trump is indeed on the side of the defense industry in his quest to restore American military power abroad, Lockheed Martin is going to sit in the front row of procurement.
SEE ALSO FROM KIPLINGER: The Best Dividend Stocks in the Dow Averages
Dividend yield: 2.9%
If President Trump's policies do indeed break the economy wide open for growth, consumer products giant PepsiCo, Inc. (PEP) is among the dividend stocks that will be on the front lines of prosperity.
PepsiCo management's decision to expand its branding footprint well beyond it eponymous "Pepsi" soda lineup over the years has helped smooth over difficult times for the industry. In fact, Pepsi is more than beverages, also boasting a massive snack line that has taken some of the sting out of the weakening popularity of sugary beverages.
Buried within each of PepsiCo's six divisions are brand names that will stand the long-game test of time: Aquafina water, Gatorade sports drinks, Tropicana and Ocean Spray juice products, Aunt Jemima pancakes, Cap'n Crunch cereal, Cheetos, Cracker Jack, Diet Pepsi, and Diet Sierra Mist are among the standouts.
PepsiCo isn't afraid to spend, either -- PEP poured out $4 billion on advertising and $700 million on R&D in 2015 -- so its brands should continue to saturate both the markets and consumers' brains with each commercial or product promotion.
PepsiCo isn't among the highest-yielding dividend stocks for retirement. Instead, it's a dual play on both price appreciation and dividend growth.
Indeed, PepsiCo's 2016 dividend hike to 75 cents per share (quarterly) was its 44th consecutive annual raise. Free cash flow was just under $8 billion last year, plus Pepsi has about $15 billion in cash and short-term investments, so financially, PEP is bulletproof. Better still, PepsiCo's dividend payout ratio of 63% leaves way more room for dividend hikes than The Coca-Cola Co.'s (KO) 83% payout.
While PepsiCo isn't terribly cheap, at 20 times forward earnings, it's still a hair less expensive than KO, and PEP offers much better earnings growth prospects (6% vs. 2% over the next five years) to boot.
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Johnson & Johnson
Courtesy Johnson & Johnson
Dividend yield: 2.8%
Johnson & Johnson (JNJ) is one of my personal favorites among retirement-focused dividend stocks, and full disclosure: I own it myself.
JNJ straddles two critical sector of the economy in healthcare and pharmaceuticals. Both in and of themselves also intersect, which brings us to the key point behind JNJ's longevity, strength, and investment selling point: its Consumer, Pharmaceutical and Medical Devices divisions.
Pharmaceuticals and Medical combine to make up just more than 80% of total revenues, so clearly, healthcare is the biggest driver of JNJ. But having essentially 20% exposure to consumer products buffers Johnson & Johnson from significant economic or sector downturns, including a recent turndown in the medical sector.
A key to JNJ's longevity, and that of any pharm stock of course, is its pipeline of future medicines and drugs. Here, the company has several late-stage trial drugs, which includes additional indications for already-approved myleoma treatment Imbruvica and heart treatment Xarelto.
Johnson & Johnson's biggest claim to dividend fame, of course, is its standing as a Dividend Aristocrat, having raised its payout for 54 consecutive years, including a 6.7% bump in 2016.
Free cash flow has been steadily on the rise, including just less than $16 billion in FCF in 2015. Meanwhile, Johnson & Johnson just used $30 billion in cash to buy up Switzerland-based Actelion Ltd, a maker of products for pulmonary arterial hypertension ... which means it still has a decent war chest of about $10 billion remaining.
JNJ trades about the same as the broader S&P 500, and offers long-term stability and income. This is a good time to strike.
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