Early Retirement Portfolio: 16 Stocks to Live Off Dividends Revisited
In this article, we discuss the best dividend stocks for an early retirement portfolio. You can skip our detailed analysis of dividend stocks and their performance in the past, and go directly to read Early Retirement Portfolio: 5 Stocks to Live Off Dividends Revisited.
As investors approach the threshold of retirement, the quest for financial stability gains paramount importance. Among the myriad investment options available, the allure of steady dividend payments stands out as a beacon of reliability and security. These payments represent a portion of a company's profits shared with its shareholders, presenting a consistent income stream. Research indicates that a significant trend among Americans is retiring earlier than they had initially intended, often driven by factors that lie beyond their control. Among the primary reasons cited for this early retirement are issues like deteriorating health conditions or unexpected job loss. In 2022, a Gallup survey highlighted that while the anticipated retirement age averaged around 66 years old, the reality showed a different trend, with individuals retiring at an average age of 62. This discrepancy between anticipated and actual retirement ages has persisted over the years, maintaining a consistent gap of approximately five years since 2002, as reported by Gallup.
According to a recent Goldman Sachs Retirement survey, respondents pointed out that certain things like having credit card debt, setting aside money for college, and taking care of or financially assisting family members had an impact on their capacity to save for retirement. This influence persisted despite better conditions in the economy and financial markets. Here are some comments from Chris Ceder, Senior Retirement Strategist at Goldman Sachs Asset Management:
“The financial vortex threatens all Americans because, despite their best efforts to consistently save when employed, life’s unexpected bumps can meaningfully derail the best retirement savings plans. Only 36% of US workers have three months of income or more saved for emergencies. Unplanned and often unpredictable financial challenges push too many of us off track, and catching up may be difficult. Saving for retirement must remain a top priority.”
Amidst this landscape of uncertainty, income generated from dividend stocks serves as a valuable lifeline for retirees. Dividend-paying stocks have demonstrated their resilience and potential as a source of stability in investment portfolios. Over time, these stocks have proven to be reliable performers, often surpassing the broader market in terms of generating consistent returns. Since 1900, dividends have made up roughly 45% of all the gains seen in the S&P 500 Index.
In one of its reports, Thornburg Investment Management illustrated the contrast in income growth between bonds and dividend-paying stocks. The firm took a hypothetical $1 million investment from 1990 and calculated the annual income generated. Over the years, the income from bonds gradually decreased, while the dividend income from the equity investment consistently increased. Initially lower than the bond income, the dividend earnings exceeded bond income in about a decade and eventually reached 912% of the bond income by 2020.
Dividend growers are popular for an early retirement portfolio. These are companies known for consistently increasing their dividend payouts over time. Their attractiveness lies in their ability to potentially offer a reliable and growing stream of income, a crucial factor for individuals aiming to retire early. Earlier this year, I wrote an article on Early Retirement Portfolio: 15 Stocks to Live Off Dividends Revisited sourced from diverse user platforms. Given the prevailing challenges of escalating inflation and the looming specter of recession, it became necessary to revisit and revamp that selection. This revised list highlights stocks with strong histories of regular dividend payments and consistent payout increases for over a decade. Some stocks from the previous list were swapped with those showing consistent payout growth. Eastman Chemical Company (NYSE:EMN), Realty Income Corporation (NYSE:O), and Pinnacle West Capital Corporation (NYSE:PNW) remain on our list of top stocks for an early retirement portfolio due to their consistent dividend growth and strong dividend yields.
Photo by Ovidiu Gruescu on Unsplash
Our Methodology:
For this list, we selected companies that have raised their payouts for over 10 years and have dividend yields above 2%, as of December 26. These companies' track records of dividend growth make them attractive for retirees looking for reliable income sources. Additionally, we considered hedge fund sentiment based on data from 910 hedge funds tracked by Insider Monkey in Q3 2023. The stocks are organized in ascending order based on their dividend yields as of December 26.
16. The Procter & Gamble Company (NYSE:PG)
Dividend Yield as of December 26: 2.58%
The Procter & Gamble Company (NYSE:PG) is an American multinational consumer goods company known for a wide range of household and personal care products. The company currently pays a quarterly dividend of $0.9407 per share and has a dividend yield of 2.58%, as of December 26. In the most recent quarter, the company returned $3.8 billion to shareholders through dividends, which makes it one of the best dividend stocks for an early retirement portfolio. In addition to this, the company maintains a 67-year streak of consistent dividend growth.
At the end of Q3 2023, 75 hedge funds tracked by Insider Monkey reported having stakes in The Procter & Gamble Company (NYSE:PG), up from 74 in the previous quarter. The collective value of these stakes is more than $5.7 billion. With roughly 10 million shares, Fisher Asset Management was the company's leading stakeholder in Q3.
15. Atmos Energy Corporation (NYSE:ATO)
Dividend Yield as of December 26: 2.78%
Atmos Energy Corporation (NYSE:ATO) is a Texas-based natural gas distribution company. It also owns and operates an extensive network of natural gas pipelines, transmission lines, and distribution facilities to transport and deliver natural gas to its customers. On November 8. the company declared an 8.8% hike to its quarterly dividend to $0.805 per share. This marked the company's 39th consecutive year of dividend growth, which makes ATO one of the best dividend stocks for an early retirement portfolio. As of December 26, the stock has a dividend yield of 2.78%.
As of the close of Q3 2023, 17 hedge funds in Insider Monkey's database owned stakes in Atmos Energy Corporation (NYSE:ATO), compared with 18 in the preceding quarter. The overall value of these stakes is roughly $73 million.
14. Texas Instruments Incorporated (NASDAQ:TXN)
Dividend Yield as of December 26: 3.04%
Texas Instruments Incorporated (NASDAQ:TXN) is a global semiconductor company that designs, manufactures, and sells a broad range of analog and embedded processing chips and technology solutions. The company pays a quarterly dividend of $1.30 per share, having raised it by 5% in October this year. It is one of the best stocks for an early retirement portfolio as the company has been raising its dividends for the past 12 consecutive years. The stock's dividend yield on December 26 came in at 3.04%.
At the end of September 2023, 53 hedge funds owned stakes in Texas Instruments Incorporated (NASDAQ:TXN), compared with 56 in the previous quarter, according to Insider Monkey's database. The total value of these stakes is over $2.06 billion.
13. The Coca-Cola Company (NYSE:KO)
Dividend Yield as of December 26: 3.14%
An American beverage company, The Coca-Cola Company (NYSE:KO) is next on our list of the best dividend stocks for an early retirement portfolio. The company holds a 61-year track record of consistent dividend growth and offers a quarterly dividend of $0.46 per share. As of December 26, the stock has a dividend yield of 3.14%.
According to Insider Monkey's database of Q3 2023, 57 hedge funds owned investments in The Coca-Cola Company (NYSE:KO), worth collectively more than $57 billion. Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q3.
12. Old Republic International Corporation (NYSE:ORI)
Dividend Yield as of December 26: 3.36%
Old Republic International Corporation (NYSE:ORI) is a diversified insurance company providing a range of insurance and related services. On November 21, the company announced a quarterly dividend of $0.245 per share, which fell in line with its previous dividend. In 2023, it stretched its dividend growth streak to 43 years. With a dividend yield of 3.36%, as of December 26, ORI can be added to an early retirement portfolio.
Old Republic International Corporation (NYSE:ORI) was a part of 21 hedge fund portfolios at the end of Q3 2023, which remained the same as in the previous quarter, as per Insider Monkey's database. The overall value of stakes owned by these hedge funds is over $165.5 million.
11. The J. M. Smucker Company (NYSE:SJM)
Dividend Yield as of December 26: 3.38%
The J. M. Smucker Company (NYSE:SJM) is an American food and beverage company known for a variety of products in the consumer goods industry. In fiscal Q2 2024, the company reported an operating cash flow of $177 million and its free cash flow amounted to over $28.2 million. The company's strong cash flow generation and its commitment to shareholder return make it a reliable option for an early retirement portfolio. The company has been rewarding shareholders with growing dividends for the past 22 years and currently pays a quarterly dividend of $1.06 per share. The stock has a dividend yield of 3.38%, as of December 26.
The number of hedge funds in Insider Monkey's database owning stakes in The J. M. Smucker Company (NYSE:SJM) jumped to 33 in Q3 2023, from 29 in the preceding quarter. The consolidated value of these stakes is roughly $460 million.
10. Eastman Chemical Company (NYSE:EMN)
Dividend Yield as of December 26: 3.59%
Eastman Chemical Company (NYSE:EMN) is a global specialty chemical company that produces a wide range of chemicals, materials, and fibers used in various industries. On December 6, the company declared a 2.5% hike in its quarterly dividend to $0.81 per share. through this increase, the company stretched its dividend growth streak to 14 years, which makes EMN one of the best stocks for an early retirement portfolio. The stock's dividend yield on December 26 came in at 3.59%.
As of the end of the third quarter of 2023, 35 hedge funds owned stakes in Eastman Chemical Company (NYSE:EMN), up from 33 in the previous quarter. The collective value of these stakes is over $411.2 million. With over 1.4 million shares, Millennium Management was the company's leading stakeholder in Q3.
9. Exxon Mobil Corporation (NYSE:XOM)
Dividend Yield as of December 26: 3.72%
With a dividend growth streak of 41 years, Exxon Mobil Corporation (NYSE:XOM) can be added to an early retirement portfolio. The American energy company offers a quarterly dividend of $0.95 per share and has a dividend yield of 3.72%, as of December 26. In the third quarter of 2023, the company returned $3.7 billion to shareholders through dividends.
Of the 910 hedge funds tracked by Insider Monkey at the end of Q3 2023, 79 hedge funds owned stakes in Exxon Mobil Corporation (NYSE:XOM), up from 71 in the previous quarter. These stakes are worth over $4.5 billion in total.
8. Kimberly-Clark Corporation (NYSE:KMB)
Dividend Yield as of December 26: 3.93%
Kimberly-Clark Corporation (NYSE:KMB) is a Texas-based company that specializes in the production of personal care and consumer tissue products. The company pays a quarterly dividend of $1.18 per share and has a dividend yield of 3.93%, as recorded on December 26. The company falls into the category of Dividend Kings as it maintains a 51-year streak of consistent dividend growth.
Kimberly-Clark Corporation (NYSE:KMB) was included in 31 hedge fund portfolios at the end of Q3 2023, as per Insider Monkey's database. The total value of stakes owned by these hedge funds is over $790.4 million. Among these hedge funds, Two Sigma Advisors was the company's leading stakeholder in Q3.
7. American Electric Power Company, Inc. (NASDAQ:AEP)
Dividend Yield as of December 26: 4.36%
American Electric Power Company, Inc. (NASDAQ:AEP) is one of the largest electric utility companies in the US, serving millions of customers across multiple states. The company offers a per-share dividend of $0.88 every quarter, growing it by 6% in October this year. This marked the company's 14th consecutive year of dividend growth, which makes AEP a reliable stock for an early retirement portfolio. As of December 26, the stock has a dividend yield of 4.36%.
With a collective stake value of over $545.4 million, 39 hedge funds owned positions in American Electric Power Company, Inc. (NASDAQ:AEP) in the third quarter of 2023, according to Insider Monkey's database. In comparison, 33 hedge funds owned stakes in the company in the previous quarter.
6. CubeSmart (NYSE:CUBE)
Dividend Yield as of December 26: 4.37%
CubeSmart (NYSE:CUBE) is an American real estate investment trust company that specializes in owning, operating, acquiring, and developing self-storage facilities. The company declared a 4.1% increase in its quarterly dividend on December 7 at $0.51 per share. This was the company's 14th consecutive year of dividend growth. The stock offers a dividend yield of 4.37%, as of December 26.
At the end of the third quarter of 2023, 19 hedge funds in Insider Monkey's database reported having stakes in CubeSmart (NYSE:CUBE), the same as in the previous quarter. The consolidated value of these stakes is over $173.8 million.
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Disclosure. None. Early Retirement Portfolio: 16 Stocks to Live Off Dividends Revisited is originally published on Insider Monkey.
