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Early Retirement Portfolio: 15 Stocks to Live Off Dividends

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·17 min read
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In this article, we discuss the 15 best dividend stocks for retirement. You can skip our detailed and historical analysis of the dividend stocks and go directly to read Early Retirement Portfolio: 5 Stocks to Live Off Dividends.

Early retirement is becoming a global phenomenon, widely stimulated by the Covid-19 pandemic. According to a report published by Bloomberg, in 2020, over 3 million people retired early due to the global health crisis. Another report by The Economist also stated that approximately 50% of Americans expect to retire before they turn 62, an increase of 2 percentage points from 2019. As mentioned before, the Covid-19 pandemic remained one of the many reasons for this plan of action as many people reported that they were scared of contracting the virus, especially the baby boomers. Along with this, the lack of a suitable job, coupled with the recently developed interest in the stock market contributes to the early retirement plans. In this regard, people often turn towards dividend-paying stocks as they generally promise a regular stream of income for retirees.

Historically, dividend stocks have managed to generate stable returns for their shareholders. According to a research paper published by Jefferson Research, from 1926 to 2010, around 85% of the S&P 500’s returns were from dividend stocks. The paper further mentioned that the annual average return of the dividend stocks stands at 8.8%, compared with a 7.1% annual average return of S&P 500. This being said, dividend income does not guarantee a high stable income, as a lot of capital is required for such investments. As published by Darrow Wealth Management, a $1 million worth of portfolio could generate an average dividend income of $20,000 per year, considering an average dividend yield of 2.01%. However, people lack the financial resources to opt for early retirement. The average retirement savings by the age of 60 in the U.S. is around $172,000, according to research conducted by Transamerica Center for Retirement Studies, which does not ensure financial security for retirees.

However, the ongoing wave of ‘The Great Resignation’ is driving more and more people to retire young. In the third quarter of 2021, around 15.8% of Gez Z workers are inclined to invest in 401(k) accounts, which offer retirement savings and investing plans, as reported by Fidelity Investments. Moreover, the report also mentioned that the number of Individual Retirement Accounts (IRA) grew by 12.8% in Q3 2021, from the same period last year. Keeping this growing trend of early retirement in mind, we’ll discuss some of the best dividend stocks for retirement. Some of the names mentioned in the list include JPMorgan Chase & Co. (NYSE:JPM), The Kraft Heinz Company (NASDAQ:KHC), Citigroup Inc. (NYSE:C), and Verizon Communications Inc. (NYSE:VZ).

Early Retirement Portfolio: 15 Stocks to Live Off Dividends
Early Retirement Portfolio: 15 Stocks to Live Off Dividends

Photo by Max Harlynking on Unsplash

Our Methodology:

Let’s analyze our list of the best dividend stocks for retirement. The stocks mentioned below are considered after carrying out meticulous research from different user platforms such as Reddit. We also considered the analysts’ ratings and future growth potential of the companies. Along with this, the hedge fund sentiment was measured using data from 867 hedge funds tracked by Insider Monkey in Q3. These stocks are ranked according to their dividend yields.

Early Retirement Portfolio: 15 Stocks to Live Off Dividends

15. Costco Wholesale Corporation (NASDAQ:COST)

Number of Hedge Fund Holders: 55

Dividend Yield as of January 27: 0.65%

Costco Wholesale Corporation (NASDAQ:COST) is an American company that operates an international chain of membership warehouses. This December, Charlie Munger acknowledged the company’s business model, emphasizing it over e-commerce giant Amazon. This statement from the vice-chairman of Berkshire Hathaway comes after Costco Wholesale Corporation (NASDAQ:COST) reported net sales of $18.1 billion in November 2021, up 15.7% from the prior-year quarter.

Insider Monkey’s data shows that hedge fund sentiment remained positive for Costco Wholesale Corporation (NASDAQ:COST) in Q3, as 55 hedge funds tracked by Insider Monkey were bullish on the company, up from 54 in the previous quarter. These stakes are valued at roughly $4.4 billion.

Costco Wholesale Corporation (NASDAQ:COST) has a 17-year track record of consistent dividend growth, coming through as one of the leading dividend stocks for retirement. Following the company’s solid net sales, Loop Capital raised its price target on Costco Wholesale Corporation (NASDAQ:COST) to $585, while maintaining a Buy rating on the shares. The firm’s analyst also highlighted the stability in the company’s membership fee income.

Like JPMorgan Chase & Co. (NYSE:JPM), The Kraft Heinz Company (NASDAQ:KHC), Citigroup Inc. (NYSE:C), and Verizon Communications Inc. (NYSE:VZ), Costco Wholesale Corporation (NASDAQ:COST) is also one of the notable dividend stocks.

ClearBridge Investments mentioned Costco Wholesale Corporation (NASDAQ:COST) in its Q2 2021 investor letter. Here is what the firm has to say:

“The pandemic has created challenges for businesses large and small; one major challenge for large essential retailers such as ClearBridge holdings Home Depot, Walmart and Costco has been ensuring adequate staffing to meet demand under trying conditions. All three instituted enhanced pay practices during the pandemic, with raises, unplanned bonuses and other benefits helping compensate employees for their efforts in a difficult environment. In February 2021 Costco, which we have long acknowledged as a leader in workplace practices, raised its starting wage to $16 an hour; its average wage at the time was $24 an hour.

The expanded benefits have meant a hit to margins for these companies, even while the essential services nature of their businesses has meant large influxes in sales that could offset these outlays, but we view the moves as forward-thinking human capital management.”

COST shares are down 13% so far in 2022.

14. CVS Health Corporation (NYSE:CVS)

Number of Hedge Fund Holders: 61

Dividend Yield as of January 27: 2.06%

CVS Health Corporation (NYSE:CVS), an American healthcare company, surged 2.2% on November 18, 2021, as the company announced a new retail footprint strategy, with a particular focus on its digital assets according to the changing consumer needs. The stock’s year-to-date returns stood at 2.52%, as of the close of January 27.

Of the 867 hedge funds tracked by Insider Monkey, 61 hedge funds held stakes in CVS Health Corporation (NYSE:CVS) in Q3, compared with 67 in the previous quarter. The total value of these stakes is over $1.06 billion.

On October 5, CVS Health Corporation (NYSE:CVS) declared a quarterly dividend of $0.50 per share, with a dividend yield of 2.06%. In its Q3 results, the company posted an EPS of $1.97, beating estimates by $0.18. Moreover, CVS Health Corporation (NYSE:CVS)’s revenue for the quarter stood at $73.7 billion, up 10% from the prior-year quarter. After the company’s new retail strategy, Seaport Global initiated its coverage on the stock with a Buy rating and a $110 price target.

ClearBridge Investments mentioned CVS Health Corporation (NYSE:CVS) in its Q2 2021 investor letter. Here is what the firm has to say:

“Our differentiated positions in the health care sector also made strong contributions as the market began to reward the heavily discounted sector.CVS Health saw strength in its pharmacy benefits manager business as well as its managed care business, Aetna, helping to confirm our positive view of CVS’s repositioning of its business model from a dispensary model to a service model. With CVS store-based health care services offering patients better convenience, encouraging better health care compliance and ultimately lower costs, we believe the company is at the forefront of a changing mindset in the health care services sector.”

13. Raytheon Technologies Corporation (NYSE:RTX)

Number of Hedge Fund Holders: 48

Dividend Yield as of January 27: 2.28%

Raytheon Technologies Corporation (NYSE:RTX) is an American multinational aerospace and defense company that also provides intelligence services. Recently, the company was able to achieve a $447.6 million worth of contract from Naval Air Systems for enhancing maintenance across the government agencies.

Raytheon Technologies Corporation (NYSE:RTX) is making headway due to its strong balance sheet and strengthening management. In Q3, the company posted an EPS of $1.26, beating the estimates by $0.17. Raytheon Technologies Corporation (NYSE:RTX), one of the best dividend stocks for retirement, has been increasing its dividend for the past 28 years and the stock’s current dividend yield stands at 2.28%.

The number of hedge funds tracked by Insider Monkey having stakes in Raytheon Technologies Corporation (NYSE:RTX) fell to 48 in Q3, from 53 in the previous quarter. However, the value of these stakes stood at $2.25 billion, up from $2.1 billion reported in Q2.

ClearBridge Investments mentioned Raytheon Technologies Corporation (NYSE:RTX) in its Q2 2021 investor letter. Here is what the firm has to say:

“Broader market leadership was a relative benefit for the ClearBridge Large Cap Value Strategy, which outperformed the Russell 1000 Value Index in the second quarter… Separately, Raytheon Technologies benefited from an improving health outlook that is contributing to a faster than anticipated recovery in air travel, which should drive stronger results for Raytheon’s commercial aerospace business.”

12. JPMorgan Chase & Co. (NYSE:JPM)

Number of Hedge Fund Holders: 101

Dividend Yield as of January 27: 2.75%

As per Insider Monkey’s Q3 data, 101 hedge funds tracked by Insider Monkey held positions in JPMorgan Chase & Co. (NYSE:JPM), an American Investment bank and financial services company. These stakes hold a consolidated value of $5.6 billion, up from $4.9 billion in the previous quarter.

JPMorgan Chase & Co. (NYSE:JPM) has a 10-year track record of consistent dividend growth and currently pays an annual dividend of $4.00 per share. The stock’s current dividend yield stands at 2.75%. In Q3, JPMorgan Chase & Co. (NYSE:JPM) reported its fifth consecutive quarter of earnings beat, after recovering from pandemic-related miss. Wall Street analysts regarded the bank’s solid quarter as a major contributor to recovering economy and financials.

As JPMorgan Chase & Co. (NYSE:JPM) showed consistency with earnings, Wells Fargo, in October, lifted the firm’s price target on the stock to $210, with an Overweight rating on the shares.

Vltava Fund mentioned JPMorgan Chase & Co. (NYSE:JPM) in its Q3 2021 investor letter. Here is what the firm has to say:

“While all the previous names could be categorised as founder, continuing, or key shareholders, these last two names fall into the category of hired professional managers. This is actually the most numerous category among the bosses of large companies, but even among them there exist a number of individuals with exceptional long-term track records. In our view, these include also Jamie Dimon and Herman Gref.

We consider JP Morgan to be the strongest, largest, and most profitable bank in the world. It has not always been so, and the fact that it is what it is today can be attributed especially to its CEO Jamie Dimon. Dimon has spent his entire career in banking. He came to JP Morgan in a roundabout way in 2004 after the bank bought Bank One, of which he was CEO at the time. Since early 2006, Dimon has been CEO of the entire JP Morgan.

The quality and strength of JP Morgan under his leadership became fully apparent for the first time in 2008. Not only did JP Morgan help to stabilise the market by taking over the failing Bear Stearns in the spring of that year, but it was the only major US bank that did not require government assistance throughout the Great Financial Crisis and that was highly profitable even in the difficult year of 2008. Today, JP Morgan is even bigger, even more profitable, and even stronger than ever before. Many investors view banks with disdain, but a good bank with good management can be a very good long-term investment. From the time of its merger with Bank One in 2004 through the end of 2020, JP Morgan’s stock has outperformed even the S&P 500 index. The bank has earned a total net profit of USD 330 billion during this period, of which USD 232 billion has been paid out to shareholders in dividends and in share buybacks. I can recommend two books about Jamie Dimon: The House of Dimon and Last Man Standing.”

11. Eastman Chemical Company (NYSE:EMN)

Number of Hedge Fund Holders: 30

Dividend Yield as of January 27: 2.56%

Eastman Chemical Company (NYSE:EMN) is an American materials company that produces a wide range of metals, chemicals, and fibers for daily use. In Q3, the company presented a positive hedge fund sentiment, as 30 hedge funds tracked by Insider Monkey held stakes in the company, up from 27 in the previous quarter. These stakes hold a consolidated value of $254.6 million, showing considerable growth from $156.4 million in Q2.

On December 2, Eastman Chemical Company (NYSE:EMN) raised its quarterly dividend by 10% at $0.76 per share. The stock’s current dividend yield stands at 2.56%. Eastman Chemical Company (NYSE:EMN), one of the best dividend stocks for retirement, has been increasing its dividend for the past 12 years. In Q3, the company earned $2.72 billion in revenue, experiencing a 28.3% growth from the prior-year quarter.

In November, Deutsche Bank kept a Buy rating on Eastman Chemical Company (NYSE:EMN), expecting the earnings to grow in the coming quarters. As of the close of January 27, the stock’s 12-month returns stood at 18.63%.

10. Citigroup Inc. (NYSE:C)

Number of Hedge Fund Holders: 79

Dividend Yield as of January 27: 3.18%

Citigroup Inc. (NYSE:C), an American investment bank and financial services company, recently gained ground among investors as analysts point towards improving credit card metrics after the pandemic. In October, BMO Capital lifted its price target on Citigroup Inc. (NYSE:C) to $86, while keeping an Outperform rating on the shares, highlighting the bank’s revenue-driven Q3 earnings.

In Q3, Citigroup Inc. (NYSE:C) earned $17.1 billion in revenue, which beat analysts’ consensus by $220 million. One of the best dividend stocks for retirement, Citigroup Inc. (NYSE:C) pays an annual dividend of $2.04 per share, with its 3-year dividend growth standing at 112.5%. The stock's current dividend yield is 3.18%.

As of Q3, 79 hedge funds in Insider Monkey’s database reported owning stakes in Citigroup Inc. (NYSE:C), down from 87 in the previous quarter. The total value of these stakes is over $5.5 billion.

9. STAG Industrial, Inc. (NYSE:STAG)

Number of Hedge Fund Holders: 17

Dividend Yield as of January 27: 3.63%

STAG Industrial, Inc. (NYSE:STAG) is a real estate investment trust that deals in the acquisition of single-tenant and industrial properties. The company makes it to our list of the best dividend stocks for retirement as it holds a 9-year track record of consistent dividend growth. Currently, STAG Industrial, Inc. (NYSE:STAG) pays an annual dividend of $1.45 per share, with a dividend yield of 3.63%.

STAG Industrial, Inc. (NYSE:STAG) announced its Q3 results on October 28 and posted an FFO of $0.53, beating the estimates by $0.02. The company earned $142.1 million in revenue, experiencing a 21.1% growth from the prior-year quarter. Acknowledging its Q3 results, recently, RBC Capital lifted its price target on STAG Industrial, Inc. (NYSE:STAG) to $50, while maintaining an Outperform rating on the shares.

At the end of Q3 2021, 17 hedge funds in Insider Monkey’s database held stakes in STAG Industrial, Inc. (NYSE:STAG), up from 15 in the previous quarter. The total worth of these stakes is over $219.3 million. Among these hedge funds, Long Pond Capital was the company’s leading shareholder, owning more than 2.2 million shares.

8. Kellogg Company (NYSE:K)

Number of Hedge Fund Holders: 22

Dividend Yield as of January 27: 3.56%

Kellogg Company (NYSE:K) is an American multinational food manufacturing company. In Q3, the company saw a decline in the number of hedge funds owning positions in it but remained on investors’ list due to its solid Q3 results. Kellogg Company (NYSE:K) beat EPS estimates by $0.16 at $1.09. Moreover, the company also reported a significant growth in its organic net sales.

At the end of Q3, 22 hedge funds in Insider Monkey’s database reported holding $290 million worth of stakes in Kellogg Company (NYSE:K). In the previous quarter, 32 hedge funds held positions in the company. Jim Simons’ Renaissance Technologies was the company’s largest stakeholder in Q3, owning over 1.5 million shares.

Kellogg Company (NYSE:K) has a track record of 17 years of consistent dividend growth and the stock’s current dividend yield stands at 3.56%. This October, Deutsche Bank set a $71 price target on the stock, with a Buy rating on the shares.

7. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)

Number of Hedge Fund Holders: 37

Dividend Yield as of January 27: 3.82%

Walgreens Boots Alliance, Inc. (NASDAQ:WBA) remains one of the best dividend stocks for retirement as the company holds a track record of 46 years of consistent dividend growth and has paid dividends for straight 89 years. It is the holding company that owns the retail pharmacy chains, Walgreens and Boots.

Camber Capital Management was the largest shareholder of Walgreens Boots Alliance, Inc. (NASDAQ:WBA) in Q3, holding 4 million shares in the company. Along with this, 37 hedge funds in Insider Monkey’s database were bullish on the stock in Q3, down from 41 in the previous quarter. These stakes hold a value of over $850 million.

As of fiscal Q4 2021, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) marked its fifth consecutive quarterly beat. The company’s EPS of $1.17 exceeded estimates by $0.07. Moreover, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) also reported an 8.6% year-over-year growth in net sales at $132.5 billion.

6. Realty Income Corporation (NYSE:O)

Number of Hedge Fund Holders: 22

Dividend Yield as of January 27: 4.37%

An American real estate investment trust, Realty Income Corporation (NYSE:O) increased its monthly dividend in November by 4.2% at $0.246 per share. This marks the company’s 113th common stock monthly dividend hike since it went public in 1994, making it one of the notable dividend stocks for retirement. The stock’s current dividend yield stands at 4.37%.

Recently, Mizuho raised its price target on Realty Income Corporation (NYSE:O) to $82, with a Buy rating on the shares, as the firm’s analyst acknowledged the company’s importance in the REITs space. Moreover, the strategic measures by Realty Income Corporation (NYSE:O) during the third quarter also support the analysts’ consensus. The company announced its expansion into Europe, as it invested over $532.5 million in the region during Q3.

Millennium Management held the largest stake in Realty Income Corporation (NYSE:O) in Q3, valued at $60.5 million. Overall, 22 hedge funds tracked by Insider Monkey have positions in the company in Q3, compared with 23 in the previous quarter. These stakes hold a value of over $275 million.

Realty Income Corporation (NYSE:O) is also favored by investors and analysts like major dividend stocks, such as JPMorgan Chase & Co. (NYSE:JPM), The Kraft Heinz Company (NASDAQ:KHC), Citigroup Inc. (NYSE:C), and Verizon Communications Inc. (NYSE:VZ).

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Disclosure. None. Early Retirement Portfolio: 15 Stocks to Live Off Dividends is originally published on Insider Monkey.