Earning a high-dividend yield and preserving your initial investment is a tough combination. Stocks offering higher yield often fall into a risky segment of the market where it’s hard to predict the future growth of the company.
That said, there are still some compelling investment opportunities that appear time-to-time for investors whose aim is to earn reasonable cash flows from their stock portfolios. With this theme in mind, we have shortlisted three stocks you can consider to hold in your retirement portfolio.
1. BCE
- Yield: 5.3%
- Quarterly Payout: $0.6975
- Market Cap: $46.05 billion
Canada’s largest telecom operator, BCE (NYSE:) offers an attractive income possibility for retirees.
Telecom companies performed poorly during the pandemic as they struggled to increase subscribers at a time when most employees worked from home.
That sluggish pandemic period, which pressured BCE shares, seems to be over. Its stock has gained more than 20% this year after the company reported solid results. Adjusted net earnings rose to $751 million, representing a 31% jump over the same period last year.
With the improving net income, BCE’s balance sheet remains strong, with $5.3 billion in available liquidity at the end of the second quarter, including $1.75 billion in cash and cash equivalents.
BCE has long maintained a policy of increasing its dividend by 5% annually, which is enough to beat inflation. The company distributes between 65% and 75% of its free cash flow in payouts, more than doubling its annual payout since the fourth quarter of 2008.
2. Chevron
- Yield: 5.47%
- Quarterly Payout: $1.34
- Market Cap: $189.4 billion
Investors in search of a higher dividend yield should also consider US oil giant Chevron (NYSE:). The California-based integrated energy, chemicals and petroleum firm is benefiting from higher commodity prices and its tight lid on spending.
Another strength that differentiates Chevron from its rivals: the company entered the pandemic in a strong financial position, with a low debt burden, suggesting that it will have to spare less cash for its debt-servicing.
At 22.4%, Chevron has the lowest debt ratio among its Big Oil peers, which include Exxon Mobil (NYSE:) and British Petroleum (NYSE:).
Among the big oil producers, Chevron is in a strong position to return more cash to investors after a year of belt-tightening and dealing with the pandemic-induced slowdown. That bullish outlook makes its stock attractive for investors who are looking to generate passive income through dividends.
In its latest update in July, Chevron told investors that it’s reviving its share-buyback program from this quarter, with a target of returning between $2 billion and $3 billion a year to investors.
Chevron’s repurchasing program comes on top of a dividend increase earlier this year, when it became the only Western oil super-major to lift the payout above pre-pandemic levels.
3. Simon Property Group
- Yield: 4.63%
- Quarterly Payout: $1.5
- Market Cap: $42.53 billion
Among the three high-yield contenders, Simon Property Group (NYSE:) is perhaps the toughest choice to make. The COVID-19 pandemic has drastically reduced the number of visits people make to their favorite shopping plazas, threatening the long-term viability for companies that manage malls.
But the latest evidence suggests that there is a huge pent-up demand for shopping at bricks-and-mortar facilities. In July, mall foot traffic surpassed 2019 levels for the first time since the pandemic started, according to data analytics firm Placer.ai, cited in a Wall Street Journal report.
Said David Simon, Chief Executive Officer of the group, in a statement last month:
“We are encouraged by the increase in our shopper traffic, retailer sales and leasing activity. Based upon our results to date and expectations for the remainder of 2021, we are again increasing our full-year 2021 guidance and again raising our quarterly dividend.”
As the largest US mall operator recovers from the pandemic-triggered slump, its stock has surged more than 50% this year, showing investors’ confidence in the future of the company.