3 Solid Dividend Stocks To Boost Any Fixed-Income Portfolio

Which stocks are the best to buy if you’re building your retirement portfolio? The answer to this question very much depends on your risk appetite and your retirement goals.

But if you are like many retirees whose goal is to preserve capital and generate stable returns to fund a comfortable lifestyle during your golden years, we generally recommend to buy low-risk stocks that provide steadily growing dividends.

Applying this screening criteria, you will generally find blue-chip companies with healthy balance sheets, strong cash flows and a long history of paying dividends. Let's take a look at three such stocks that check those boxes, and what makes them a solid long-term investment for most retirees.

1. Lockheed Martin

Lockheed Martin (NYSE:LMT) isn’t the kind of stock that generates daily headlines. But it is certainly one of those names that fits nicely in a long-term retirement portfolio.

The aerospace and security company pays a quarterly dividend of $2.6 a share, which translates into a 3.06% annual dividend yield, backed by the company's strong cash flows and its recession-proof business.

Lockheed Martin Weekly Chart.Lockheed Martin Weekly Chart.

During the pandemic, Lockheed posted earnings, sales and cash flow that kept rising, helped in part by accelerated progress payments from the Department of Defense, which were then passed on to suppliers.

At a time when most companies are hesitant to provide earnings guidance, LMT reported a record order backlog of $147 billion, which proves the long-term earning stability and income for its investors. Lockheed still trades at roughly 14 times its trailing price-to-earnings ratio, indicating that this stock isn’t expensive and could be a solid addition to your retirement portfolio. Lockheed Martin shares closed yesterday at $346.41.

2. Merck & Company

Health-care providers offer services that remain necessary even in a recession. Plus, for pharma companies, economic swings don’t typically curb the roll-out of new drugs and devices.

Stocks like Merck (NYSE:MRK) are well positioned to not only beat the market in a downturn, but also provide good sustainable returns. The company is currently benefiting from the success of its top-selling cancer drug Keytruda. Analysts expect Keytruda annual sales to reach $20 billion by 2023, according to FactSet, generating more than a third of total company sales.

Merck Weekly Chart.Merck Weekly Chart.

Merck is also one of the leading drug makers developing therapies to battle COVID-19. Though its vaccine candidate failed to produce positive results, the company is aggressively pursuing therapies to provide a cure for infected individuals.

A COVID-19 pill, currently in development with Ridgeback Biotherapeutics, significantly reduced virus infections in subjects after five days of treatment, a mid-stage study showed, as reported by the Wall Street Journal last week.

Merck recently agreed to buy VelosBio Inc. for $2.75 billion to bolster its lineup of cancer therapies, and privately held biopharma company OncoImmune for an upfront $425 million to gain a potential therapy for severe COVID.

With a growing dividend and share buybacks, Merck is a good long-term bet for those seeking rising payouts. The stock, which yesterday closed at $76.26, currently yields 3.49%, which translates into a quarterly dividend of $0.65 a share after a 7% hike in November.

3. Procter & Gamble

Consumer staple giant Procter & Gamble (NYSE:PG) is another low-risk stock that is ideal for a long-term retirement portfolio. P&G has an extensive track-record of rewarding its investors by steadily growing payouts and capital gains.

The Ohio-based company has increased its dividend for 64 consecutive years. Yielding 2.47% per annum, P&G pays a quarterly dividend of $0.79 per share after hiking it 6% in 2020. During the past decade, its shares have more than doubled, including dividends, giving its investors a handsome total return.

Procter & Gamble Weekly Chart.Procter & Gamble Weekly Chart.

At 21, P&G’s forward price-to-earnings multiple is close to the highest level in the past five years. But the company’s growth momentum suggests that shares of the maker of such household mainstays as Bounty paper towels, Gillette razors and Tide laundry detergent make a safe bet for long-term investors.

In January, P&G boosted its sales and profit outlook, stating its organic revenue will grow as much as 6% in fiscal 2021, an increase from the previous outlook of no more than 5%. P&G also sees core earnings per share rising as much as 10%. Shares closed yesterday at $128.56.

Bottom Line

Adding solid dividend stocks to your income portfolio could create a sustained income stream to rely on during retirement. Start slowly building your income portfolio when stock prices are attractive and yields are high. By pursuing this strategy, you will continue to earn steadily growing payouts even when the economy is in bad shape.

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