But today's world is different. Interest rates and bond yields have been stuck in the basement for far too long, reducing future expected returns. Compounding the problem: Americans are living longer than ever before.
If you're wondering how to retire without facing the uncomfortable decision of what securities to sell, or questioning whether you are at risk of outliving your savings, wonder no more. You can lean on the cash from dividend stocks to fund a substantial portion of your retirement. In fact, Simply Safe Dividends has published an in-depth guide about living on dividends in retirement.
Many companies in the market yield 4% or more. And 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, because you likely won't have to dig into your nest egg as much, you'll have a chance to leave your heirs with a sizable portfolio when the time comes.
Here are 20 high-quality dividend stocks, yielding on average above 4%, that should fund at least 20 years of retirement, if not more. They have paid uninterrupted dividends for more than 20 consecutive years, have fundamentally secure payouts and have the potential to collectively grow their dividends to protect investors' purchasing power over time.
Universal Health Realty Income Trust
Sector: Real estate
Market value: $1.4 billion
Dividend yield: 2.7%
Universal Health Realty Income Trust (UHT, $100.44) is a real estate investment trust (REIT) boasting 69 investments in health-care properties across 20 states. Nearly three-quarters of its portfolio is medical office buildings and clinics; these facilities are less dependent on federal and state health-care programs, reducing risk. But UHT also has hospitals, freestanding emergency departments and child-care centers under its umbrella.
The REIT was founded in 1986 and got its start by purchasing properties from Universal Health Services (UHS), which it then leased back to UHS under long-term contracts. UHS remains a financially strong company that accounts for about 20% of Universal Health Realty Income Trust's revenue today.
The firm has increased its dividend each year since its founding. However, unlike many dividend stocks that hike payouts once annually, UHT typically does so twice a year, albeit at a leisurely pace. The REIT's current 68-cent-per-share dividend is about 1.5% better than it was at this time in 2018. But as long as management continues focusing on high-quality areas of health care that will benefit from America's aging population, the stock's dividend should remain safe and growing.
Sector: Real estate
Market value: $24.2 billion
Dividend yield: 3.6%
Realty Income (O, $76.10) is an appealing income investment for retirees because it pays dividends every month. Impressively, Realty Income has paid an uninterrupted dividend for 590 consecutive months - one of the best track records of any REIT in the market.
The company owns more than 5,900 commercial real estate properties are leased out to more than 260 tenants - including Walgreens (WBA), FedEx (FDX) and Dollar General (DG) - operating in 49 industries. These are mostly retail-focused businesses with strong financial health; 49% of Realty Income's rent is derived from tenants with investment-grade ratings.
Importantly, Realty Income focuses on single-tenant commercial buildings leased out on a "triple net" basis. In other words, rents are "net" of taxes, maintenance and insurance, which tenants are responsible for. This, as well as the long-term nature of its leases, has resulted not only in very predictable cash flow, but earnings growth in 22 of the past 23 years.
While e-commerce threatens many brick-and-mortar retailers, Morningstar equity analyst Kevin Brown notes that 96% of Realty Income's portfolio is "leased to tenants that are protected from e-commerce or economic downturns."
Simply put, Realty Income is one of the most dependable dividend growth stocks in the market. Investors can learn more from Simply Safe Dividends about how to evaluate REITs here.
National Retail Properties
Sector: Real estate
Market value: $9.2 billion
Dividend yield: 3.7%
National Retail Properties (NNN, $55.97) has increased its dividend for 30 consecutive years. For perspective, only two other publicly traded REITs in America have raised their dividends for an equal amount of time or longer.
This REIT owns approximately 3,000 freestanding properties that are leased out to more than 400 retail tenants - including 7-Eleven, Mister Car Wash and Camping World (CWH) - operating across more than 30 lines of trade. No industry represents more than 18% of total revenue, and properties are primarily used by e-commerce-resistant businesses such as convenience stores and restaurants.
Like Realty Income, National Retail is a triple-net-lease REIT that benefits from long-term leases, with initial terms that stretch as far as 20 years. Its portfolio occupancy as of mid-year 2019 was 98.8%; it hasn't dipped below 96% since 2003, either - a testament to management's focus on quality real estate locations.
National Retail's dividend remains on solid ground, even as the retail world evolves. CFRA equity analyst Chris Kuiper recently wrote that the firm "is more insulated from retailer woes compared to peers" as most of its tenants are "either restaurants or retailers focused on necessity-based shopping."
Sector: Real estate
Market value: $36.1 billion
Dividend yield: 3.9%
The long-term outlook for health-care-focused real estate is tantalizing. Kevin Brown, an equity analyst at Morningstar, writes 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, $89.17), Brown says, "will benefit from these industry tailwinds because of its portfolio of high-quality assets connected to top operators."
This health-care real estate investment trust owns more than 1,700 properties. The bulk of its holdings (57%) are senior housing buildings, but its portfolio also includes outpatient medical buildings, hospitals and long-term/post-acute care.
This is a conservatively managed REIT. Besides holding a diverse set of properties, Welltower maintains an investment-grade credit rating and derives 93% of its rent from private-pay sources. That's ideal compared to depending on Medicare and Medicaid reimbursements, which can fluctuate because of regulatory changes.
This disciplined strategy has enabled Welltower to pay uninterrupted dividends since 1971. That trend seems likely to continue given the industry's long-term prospects.
Market value: $104.5 billion
Dividend yield: 3.9%
Toronto-Dominion Bank (TD, $57.45) is one of North America's largest financial institutions. The bank's revenue is balanced between simple lending operations such as home mortgages and fee-based businesses such as insurance, asset management and card services. Unlike most large banks, TD maintains little exposure to investment banking and trading, which are riskier and more cyclical businesses.
As one of the 10 largest banks on the continent, TD's extensive reach and network of retail locations has provided it with a substantial base of low-cost deposits. This helps the company's lending operations earn a healthy spread and provides the bank with more flexibility to expand the product lines it can offer.
Shareholders have received cash distributions since 1857, making TD one of the oldest continuous payers among all dividend stocks. A conservative corporate culture and strong investment-grade rating are reasons to believe in the sustainability of the dividend going forward. Also, management believes the bank can grow its adjusted earnings per share (EPS) by 7% to 10% annually over the medium term, which should help TD improve its dividend in the years to come.
Market value: $70.1 billion
Dividend yield: 3.9%
Duke Energy (DUK, $96.28) is about as steady as dividend stocks come. In fact, 2019 is the 93rd straight year that the regulated utility paid a cash dividend on its common stock. It's no surprise that Duke appears on Simply Safe Dividends' list of the best recession-proof stocks.
The company services approximately 7.7 million retail electric customers across six states in the Midwest and Southeast. 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 dividend ... and substantial growth plans over the next few years. The utility plans to invest $37.5 billion between 2019 and 2023 to expand its regulated electric and gas earnings base. If everything goes as expected, Duke should generate 4% to 6% annual EPS growth through 2023, driving similar upside in its dividend.
"We expect above-average rate base growth over the next several years and view the company's recent sale of nonregulated generating assets in the Midwest as a strong positive," Argus analyst Gary Hovis wrote in a September note. "Other positive fundamentals include the company's improving balance sheet and well-managed nuclear-generating assets."
Market value: $64.8 billion
Dividend yield: 4.0%
Regulated utilities are a source of generous dividends and predictable growth thanks to their recession-resistant business models. As a result, utility stocks tend to anchor many retirement portfolios.
Southern Company (SO, $61.98) 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 because of 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.
Morningstar equity analyst Charles Fishman, CFA, believes Southern Company will return to a long-term EPS growth rate in excess of 5% once it finishes construction of its nuclear projects in several years.
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: $250.2 billion
Dividend yield: 4.1%
While rival AT&T has aggressively diversified its business into pay-TV and media content in recent years, Verizon (VZ, $60.51) has remained focused on its core wireless business. In fact, the company even restructured last year to better focus on its rollout of 5G service.
Good news on that front, too: While 2020 should see the lion's share of tangible progress, Verizon expects to deliver 5G service to 30 major markets by the end of 2019; it has launched in 10 of them already.
Thanks to its investments in network quality, the company remains at the top of RootMetrics' rankings of wireless reliability, speed and network performance. These qualities have resulted in a massive subscriber base which, combined with the non-discretionary nature of Verizon's services, make the firm a reliable cash cow.
In fact, Verizon and its predecessors have paid uninterrupted dividends for more than 30 years. Its dividend growth rate, like AT&T's, is hardly impressive - VZ announced a mere 2% uptick this year. But the yield is high among blue-chip dividend stocks, and the almost utility-like nature of its business should let Verizon slowly chug along with similar increases going forward.
Market value: $64.9 billion
Dividend yield: 4.5%
Dominion Energy (D, $80.84) is one of the largest generators and transporters of energy in the country and has paid uninterrupted dividends for more than eight decades. However, the diversified 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 writes.
In other words, the business has become even more resilient. In fact, Fishman estimates wide-moat nonutility and transmission businesses account for 45% of Dominion's operating earnings, up from 30% in 2016.
Dominion Energy also boasts an investment-grade credit rating, which provides it with the financial flexibility to pursue opportunistic growth projects. That flexibility enabled Dominion in January 2019 to close its acquisition of Scana, a distressed regulated utility that operated in the Carolinas and Georgia.
The firm's dividend should remain safe and growing thanks to Dominion's solid base of regulated assets and disciplined management team. It has been growing at a nice clip of late, too, including a nearly 10% hike starting with the payout distributed in March 2019.
Sector: Real estate
Market value: $15.4 billion
Dividend yield: 4.6%
W.P. Carey (WPC, $89.88) is a large, well-diversified REIT with a portfolio of "operationally-critical commercial real estate," as the company describes it. More specifically, W.P. Carey owns nearly 1,200 industrial, warehouse, office and retail properties.
The company's properties are leased out to 320 tenants under long-term contracts, with 99% of its leases containing contractual rent increases. W.P. Carey's operations are also nicely diversified - about a third of its revenue is generated outside of the U.S., its top 10 tenants represent less than 25% of its rent, and its largest industry exposure is about 20% of its revenue.
REITs, as a sector, are among the highest-yielding dividend stocks on the market given a structure that literally mandates they pay out 90% of their profits as cash distributions to shareholders. But W.P. Carey and its 4.6% yield stick out. Better still, thanks to its aforementioned qualities, as well as its strong credit and conservative management, WPC has paid higher dividends every year since going public in 1998. It should have little trouble continuing that streak for the foreseeable future.
Market value: $503.4 million
Dividend yield: 4.7%
Ennis (EBF, $19.28) is a wonderfully boring stock, selling business products and forms such as labels, tags, envelopes and presentation folders. The company, founded in 1909, has grown via acquisitions to serve more than 40,000 distributors today.
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. This is a diversified business, too, with no customer representing more than 5% of company-wide sales.
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 double-digit dividend raises in 2017 and 2018.
Ennis last announced a 12.5% dividend increase in June 2018, reflecting its solid financial health. In fact, Ennis holds more cash than debt. Meanwhile, its payout ratio of 62%, while a little elevated, still leaves enough room for modest dividend raises going forward, should it choose.
Ennis will never be a fast-growing business. But if you're looking for a hefty yield from your dividend stocks, EBF doles out well more than 4%. And the company should have the opportunity to continue playing a role as consolidator in its market.
Urstadt Biddle Properties
Sector: Real estate
Market value: $932.6 million
Dividend yield: 4.7%
Urstadt Biddle Properties (UBA, $23.40) is a small-cap REIT with an impressive payout history. Specifically, the dividend stock has delivered uninterrupted dividends for nearly 50 while increasing its payout in each of the last 25 years.
Urstadt owns 85 properties, mostly located along the East Coast. Approximately 82% of the REIT's square footage is focused on supermarkets, pharmacies and wholesale clubs that serve as shopping center anchors. These industries are more resistant to e-commerce given their focus on essential products such as food.
Additionally, the median household income within a 3-mile radius of the firm's properties is about 70% higher than the national average, providing healthy demand for its tenants' offerings.
Despite these strengths, Urstadt has historically only delivered a low-single digit annual pace of dividend growth. That might not turn many heads, but the yield still is substantially above the REIT average.
UBA maintains a solid balance sheet and is content buying "smaller properties that, due to their size, are below the radar for larger investors," according to management. These traits should continue to serve income investors well in retirement.
Market value: $30.6 billion
Dividend yield: 4.8%
Oneok (OKE, $74.14) is a major midstream service provider whose pipelines, processing facilities and storage assets connect natural gas liquids (NGL) supply with major market hubs. It boasts one of the largest NGL systems in the country, and it has been in business since 1906.
Oneok boasts that its "'fee-for-service' business model benefits from growing U.S. commodity production." But it's also great for stability. Approximately 85% of Oneok's earnings are generated from fee-based businesses today - up from just 66% in 2014 - which minimizes 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 earnings, which is fairly conservative for this type of business.
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% annual dividend growth through 2021. That would be easily funded if OKE hits internal targets of 14.7% annual EPS growth in that time period.
Simply put, Oneok appears to offer an attractive blend of income, growth and stability that many dividend stocks in the energy space don't.
Monmouth Real Estate Investment Corporation
Sector: Real estate
Market value: $1.4 billion
Dividend yield: 4.8%
Monmouth Real Estate Investment Corporation (MNR, $14.26) is an industrial-property REIT that was founded in 1968. The company rents out its 100-plus industrial properties under long-term leases to mostly investment-grade tenants (~80% of Monmouth's revenue). Monmouth's tenants include Ulta Beauty (ULTA), Best Buy (BBY) and Coca-Cola (KO).
Monmouth properties are relatively new, featuring a weighted average building age of just more than nine years. Its real estate also is 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 27 consecutive years. Management last raised its dividend by 6.25% in October 2017 - it has been a little inconsistent on that front, with just two hikes over the past five years. Still, the REIT sports a nice 98.9% portfolio occupancy rate and growing funds from operations (FFO, an important profitability metric for real estate investment trusts). Thus, shareholders may be in for more income growth down the road.
Market value: $301.0 billion
Dividend yield: 4.9%
Exxon Mobil (XOM, $71.14) is a member of the Dividend Aristocrats - the elite group of 57 dividend stocks that have increased their payouts on an annual basis for at least 25 years - on the merit of its own 37-year streak of hikes. But that's not its only impressive dividend feat. The integrated oil major has delivered regular cash distributions to investors for more than 100 years.
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 crash of 2014-15 forced many of Exxon's peers to cut back on spending and return more cash to shareholders in recent years, XOM is pursuing a rather ambitious growth plan.
Specifically, the company unveiled a strategy in 2018 that would see Exxon 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. According to this plan, the company's earnings could more than double by 2025 - and during Exxon's annual investor meeting in May 2019, CEO Darren Woods said those plans still were on track.
Importantly, Exxon expects it can still generate meaningful growth in cash flow even if oil prices head much lower. According to its Investor Day presentation, cash flow would grow 55% between 2017 and 2025 even if oil sank to and stayed at $40 per barrel. (Current prices are above $56 per barrel.)
If successful - and management deserves the benefit of the doubt - XOM shareholders should continue enjoying a steadily rising dividend, including the 6.1% payout raise Exxon announced earlier this year.
Market value: $19.0 billion
Dividend yield: 4.9%
Pembina Pipeline (PBA, $37.23) began paying dividends after going public in 1997 and has maintained uninterrupted payouts ever since. The pipeline operator transports oil, natural gas and natural gas liquids primarily across western Canada.
Energy markets are notoriously volatile, but Pembina has managed to deliver such steady payouts because of its business model, which is underpinned by long-term, fee-for-service contracts.
In fact, management has a target of generating 80% of Pembina's EBITDA (earnings before interest, taxes, depreciation and amortization) from fee-based activities in 2019. The firm's dividend is expected to remain more than covered by fee-based distributable cash flow (DCF, an important cash metric for pipeline companies), providing a nice margin of safety. For comparison's sake, its payout represented 135% of its DCF in 2015; it's expected to be just 78% this year.)
The dividend is further protected by Pembina's investment-grade credit rating, focus on generating at least 75% of its cash flow from investment-grade counterparties, and self-funded organic growth profile.
Pembina's financial guardrails and tollbooth-like business model should help PBA continue to produce safe dividends for years to come.
Market value: $273.1 billion
Dividend yield: 5.5%
AT&T (T, $37.38) is a Dividend Aristocrat that has paid higher dividends for 35 consecutive years, and it's also featured on Simply Safe Dividends' best high-dividend stocks list.
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 more than 370 million direct-to-consumer relationships across wireless, internet and video.
AT&T is bundling 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 (FCF, the cash profits a company generates after making necessary capital expenditures) payout ratio to sit below 60% in 2019, including all Time Warner integration costs. AT&T expects the balance sheet to normalize by year-end 2022. "I'd expect (leverage would) be somewhere around the 2.0 range or below," CFO John Stephens said on the second-quarter earnings conference call.
While AT&T's pace of dividend growth will remain moderate during this period, its high yield will provide income investors with some nice compensation as the business digests its recent deals and works on evolving for the future.
Sector: Consumer staples
Market value: $1.3 billion
Dividend yield: 5.7%
Universal Corp. (UVV, $53.74) has focused on supplying tobacco leaves to manufacturers of tobacco products since its founding in 1918. And while it isn't among the Aristocrat clique of dividend stocks, that's only because UVV is not a member of the S&P 500. It certainly has the longevity - it has paid rising dividends without interruption for 48 years.
Universal is the dominant supplier of the flue-cured and burley tobacco that is grown outside China. UVV handles between 30% to 40% of Africa's annual production, 30% to 40% of U.S. production, and 15% to 25% of Brazil's.
Thus, tobacco products manufacturers have little choice but to work with Universal, providing a steady flow of demand. Little capital is required to maintain UVV's core business as well, resulting in consistent FCF generation.
However, Universal isn't blind to health and legislative movements across the globe. Indeed, it says world consumption of cigarettes "peaked several years ago" and it expects world consumption of cigarettes to slowly decline. Rather than sitting still, the company is directing some of its cash flow into adjacent businesses such as agricultural products that require specialized processing. Management believes these opportunities could represent up to 20% of Universal's earnings in five years.
Tobacco-related companies are slowly losing their reputation as can't-miss dividend stocks given regulation and a shrinking business. However, with an investment-grade credit rating and reasonable payout ratio, Universal appears to have the financial flexibility needed to slowly adapt its business model over time while continuing its impressive dividend growth record.
Enterprise Products Partners LP
Market value: $63.2 billion
Distribution yield: 6.1%*
Enterprise Products Partners LP (EPD, $28.89), a master limited partnership (MLP), is one of America's largest midstream energy companies. It owns and operates more than 50,000 miles of pipelines, as well as storage facilities, processing plants and export terminals across America.
This MLP is connected to every major shale basin as well as many refineries, helping move natural gas liquids, crude oil and natural gas from where they are produced by upstream companies to where they are in demand.
Approximately 85% of Enterprise's gross operating margin is from fee-based activities, reducing its sensitivity to volatile energy prices. The firm also boasts one of the strongest investment-grade credit ratings in its industry and maintains a conservative payout ratio. Its DCF for the first half of 2019 was 170% of what it needed to cover its distribution.
That distribution keeps swelling, too. Enterprise not only has paid higher distributions every year since it began making distributions in 1998, but it raises those payouts on a quarterly basis, not just once a year.
The firm's future looks bright thanks to its "strategically-located assets, diverse cash flows and organic growth potential, particularly with regard to Gulf Coast export markets," writes CFRA equity analyst Stewart Glickman.
Investors can learn more from Simply Safe Dividends about how to evaluate MLPs here.
* Distributions are similar to dividends but are treated as tax-deferred returns of capital and require different paperwork come tax time.
Market value: $71.6 billion
Dividend yield: 6.2%
Canada's Enbridge (ENB, $35.37) offers a combination of very high yield and growth rarely seen in most dividend stocks - and it should continue to do so for at least for the next few years.
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.
How much it grows, and when, is a bit up in the air, however. BofA Merrill Lynch analyst Dennis Coleman wrote in June that while he's "encouraged by these growth prospects," competition, project execution and regulatory hurdles could hamper ENB's overall potential.
That said, the dividend gives shareholders plenty of cushion; the midstream energy stock yields north of 6%. It should get even bigger, too. Morningstar senior equity analyst Joe Gemino writes that Enbridge "intends to increase its annual dividend at 10% in 2020 and has maintained a three-year trailing average distributable cash coverage ratio of approximately 1.7 times the dividend over the past three years."