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Retirement Income: 3 Stocks That Pay Billions In Dividends Each Year

By Investing.com (Haris Anwar/Investing.com)Stock MarketsJun 16, 2021 09:33AM ET
www.investing.com/analysis/retirement-income-3-stocks-that-pay-billions-in-dividends-each-year-200586309
Retirement Income: 3 Stocks That Pay Billions In Dividends Each Year
By Investing.com (Haris Anwar/Investing.com)   |  Jun 16, 2021 09:33AM ET
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One proven way to secure growing income during your golden years is to buy quality dividend-growth stocks. 

Companies that increase their cash payouts quarter after quarter demonstrate that they can produce steady and reliable income for their investors, not just during the good times, but also during downturns and recessions.

Dividend growth stocks also offer a good avenue to beat inflation. Unlike bonds that pay fixed principal and interest payments, these companies provide a regular pay raise in the shape of dividends to boost your spending power. You can use that cash to reinvest and buy more shares or to meet your monthly expenses.

Below, we have put together a list of three such stocks that can be trusted to earn steadily growing income. Their dividend yields are, no doubt, low at this point as their share prices rose during the past year, but they are low-risk, high-quality names, suitable for a long-term retirement portfolio.

 1. Lowe’s

  • 5-Year Average Dividend Growth: 16.5%
  • Dividend Yield: 1.2%
  • Payout Ratio: 26%

The home-improvement giant, Lowe’s (NYSE:LOW) is one of the best dividend-growth stocks for income investors.

The No. 2 home retailer in the U.S., it has been experiencing accelerated growth since the pandemic outbreak, which prompted stay-at-home workers to spend more money into their homes.

This trend is likely to endure as many companies look for a hybrid work model, where they will allow more workers to remain flexible. This, combined with low interest rates and the massive savings that Americans have accumulated during the pandemic, point to continued gains for home-improvement stocks.

Lowe's Weekly Chart.
Lowe's Weekly Chart.

Lowe’s currently pays $0.8 a share quarterly dividend, which has grown, on average, 16.5% each year during the past five years. That kind of growth will likely continue. The company has a sustainable, low 26% payout ratio, leaving plenty of room for the retailer to distribute more cash to its shareholders.  

2. CN Rail

  • 5-Year Average Dividend Growth: 12.8%
  • Dividend Yield: 1.84%
  • Payout Ratio: 49%

Canada’s largest railroad company, Canadian National Railway (NYSE:CNI) is another solid candidate to earn growing dividend income. What makes CNR attractive is that this railroad operator enjoys a unique competitive advantage within the North American economy.

CNR runs a 19,600-mile rail network that spans Canada and mid-America, connecting the Atlantic, the Pacific and the Gulf of Mexico. This wide economic moat makes CNR a stock that has the power to defend its business, while continuing to pursue growth.

This combination of growth and income is hard to come by, as the majority of income stocks have passed their growth phase; the main reason investors like them is the regular income stream.

CN Weekly Chart.
CN Weekly Chart.

But in the case of CN Rail, the network is still in the middle of its massive expansion, triggered by a huge demand for its services. As part of its growth plans, CN Rail is in the process of acquiring US-based Kansas City Southern (NYSE:KSU). The merger, if approved by the regulator, will create the first railway network spanning the U.S., Mexico and Canada.

CN Rail pays $0.51 a share quarterly dividend, which has grown about 13%, on average, annually, during the past five years.

3. McDonald’s

  • 5-Year Average Dividend Growth: 8%
  • Dividend Yield: 2.18%
  • Payout Ratio: 74%

Among global fast-food chains, McDonald’s (NYSE:MCD) has a solid track-record when it comes to consistently rewarding investors. The company has raised its payout every year since 1976, when it first started providing a dividend.

McDonald’s has many qualities that retirees look for in a top income stock: the company has a global competitive advantage over rivals, a solid recurring revenue model and a great history of compensating its investors.

After struggling through the pandemic, when lockdowns hurt its restaurant business, the company is rapidly regaining its sales momentum. In April, it raised its 2021 global sales outlook, saying it expects U.S. sales during the current quarter to outpace pre-pandemic levels.

McDonald's Weekly Chart.
McDonald's Weekly Chart.


MCD pays quarterly dividends of $1.29 per share. That translates to an annual dividend yield of 2.18% at the current stock price. With a manageable payout ratio of 74%, the company is in a strong position to continue delivering dividend growth going forward.

Retirement Income: 3 Stocks That Pay Billions In Dividends Each Year
 

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Retirement Income: 3 Stocks That Pay Billions In Dividends Each Year

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Comments (9)
Rosana Joy Timbas
Rosana Joy Timbas Jun 18, 2021 11:44AM ET
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how?
Jimmy Chang
Jimmy Chang Jun 17, 2021 8:04AM ET
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No thanks, Reit is the best bet.
Jokers R Us
Jokers R Us Jun 16, 2021 4:04PM ET
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Buying any one of these stocks you will lose money thanks to inflation
يبيب يبيبي
يبيب يبيبي Jun 16, 2021 3:47PM ET
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Me 3
Joe Messeri
Joe Messeri Jun 16, 2021 3:41PM ET
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Cash righr now is king Anyone leaving money on the table now after such a massive 4 year run up is foolSit back and enjoy the show Then scoop it up after the puke
Saija Mattila
Saija Mattila Jun 16, 2021 3:41PM ET
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Are you suggesting timing The market?
Nordin Kadir
Nordin Kadir Jun 16, 2021 3:41PM ET
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You mean no need to invest?
Raja Chakarvorty
Raja Chakarvorty Jun 16, 2021 2:04PM ET
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Why not AT&T, verizon etc?
Jason Viada
Jason Viada Jun 16, 2021 1:34PM ET
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This is a blue chip pump and dump joke article. REITs paying 7-10%. 1.8%? HA!
Jimmy Chang
Jimmy Chang Jun 16, 2021 1:34PM ET
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Yes i got my hard earn cash in IRV. Can wait till dividend are back to normal
Me comment
Me comment Jun 16, 2021 12:29PM ET
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Lowes $.08 per quarter isn't much of an income stream foe retirement. AFL is much much better $.33 per quarter and over 30 years of dividend income growth, there management and cash flow will allow for future increases in years to come.
Mahdi Hatami
Mahdi Hatami Jun 16, 2021 12:29PM ET
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.....  Lowe’s currently pays $0.8 a share quarterly dividend, ....
Michael McDonald
Michael McDonald Jun 16, 2021 3:17AM ET
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Thanks. I always enjoy your articles.
 
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