Building a portfolio and buying stocks based on what stage of life you are in is one of the most important concepts for investors to understand. This is particularly true if you are at or near retirement since it’s very likely you will be more interested in reducing your overall risk and setting yourself up for financial security during your golden years. Some retirees even get to a point where they can live entirely off of their dividend payments, which is a truly impressive feat.
Picking the right individual stocks as a retiree is crucial since capital preservation and generating consistent income are key. Choose wisely and you can essentially “set it and forget it” when it comes to managing your investment account, but choose poorly and you might be in for a lot of unnecessary stress. The good news is that we’ve put together a list of 3 dividend stocks that are perfect for retirees to help you get a better sense of the types of companies you can rely on in your later years.
1. Cardinal Health
It makes a lot of sense for retirees to look into buying companies that are leaders in their respective industries, and Cardinal Health (NYSE:CAH) is a fine example. It’s a top 3 U.S. distributor of pharmaceuticals, medical-surgical supplies, and related products and is a company that plays a critical role in the healthcare industry. The company generates roughly 89% of its revenue from pharmaceutical distribution, which is noteworthy due to the high barriers of entry in the industry. That means Cardinal Health isn’t going anywhere anytime soon and that retirees can count on dependable sales.
There’s also some nice upside here given that elective procedures should pick up again in the near term. Another strong point to mention about Cardinal Health is that the company is a network administrator in the second stage of the Federal Pharmacy Partnership Strategy for COVID-19. That means the company will help to provide faster access to the COVID-19 vaccine for pharmacies and has an opportunity to become one of the major vaccine distributors, which is certainly a plus. With plenty of share price upside along with a current dividend yield of 3.29%, Cardinal Health is certainly a strong dividend stock for retirees.
Another solid choice for retirees is Walmart (NYSE:WMT) which is the largest retailer in the world and a member of the esteemed dividend aristocrats. With 43 consecutive years of dividend increases, Walmart is a company that has rewarded long-term shareholders for years and has a strong enough business model to continue doing so for decades to come. The company has three main segments which include the classic Walmart Stores, membership warehouse chain Sam’s Club, and an international segment. At the end of the company’s fiscal 2020, Walmart had more than 11,500 retail stores in 27 different countries.
Walmart is a great dividend stock for retirees to consider for several reasons. The consistent dividend growth and a low beta of 0.47 mean that you can rely on consistent income and low-volatility with this stock. There’s also a lot of growth potential here as the company continues to expand its e-commerce capabilities and international presence. Walmart saw its e-commerce sales in the U.S. grow 79% year-over-year in FY 2021, and there’s reason to believe the company has only just scratched the surface of the potential with this new sales channel. It’s also worth mentioning that in FY 2021 the company generated $36.1 billion in operating cash flow and returned $8.7 billion to shareholders through dividends and share repurchases, which should be music to retirees’ ears.
With AT&T (NYSE:T), retirees can own a bargain-priced dividend stock that currently offers a very attractive dividend yield of 6.94%. When you compare that dividend yield to the interest rates that savings accounts offer at this time, it’s easy to understand why this stock is so attractive for income investors. AT&T provides telecommunications and entertainment services to consumers in the U.S., Latin America, and businesses all over the world. Some of the services include wireless communications, long-distance services, data/broadband Internet services, video services, telecommunications equipment, and more.
The company has been divesting its DIRECTV and other cable and satellite TV operations that should help to improve the company’s earnings and reduce its debt load going forward. There’s also a lot to like about the company’s exposure to 5G networks, which are going to play a big role in connecting the world going forward. Finally, the fact that AT&T has a history of generating strong free cash flows thanks to its contract-based business model should give retirees peace of mind.