7 of the Best Dividend Stocks to Help Fund Your Retirement

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Retirement investing — the idea is to build a portfolio that can generate income while you sit back and relax after decades of work.

Some of the best stocks to help you fund your retirement aren’t the so-called meme stocks or other flashy trends, which can fluctuate wildly in value. Instead, dividend stocks with a reasonable expectation of returns are more likely to provide you with a chance at steady income during retirement. Dividends offer a regular payout, based on the number of shares you own.

Following are some ideas for dividend stocks likely to provide ongoing income during retirement.

1. 3M Co.

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Industrial company 3M (MMM) has paid dividends for more than 100 years and has seen dividend growth for 64 consecutive years. This company is what’s known as a “Dividend Aristocrat.” These are companies, listed as part of the S&P 500 index, that have consistently paid dividends — no matter what’s going on with the market or the economy — at least once a year for at least 25 years.

3M operates in numerous fields, including health care, consumer goods and safety. There are numerous well-known brands owned by 3M, such as Post-it and Scotch-Brite, which make the company a staple in the U.S. and likely to have long-term staying power.

2. Coca-Cola Co.

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Coca-Cola (KO) is one of the most recognizable companies and has increased its dividends annually for 62 years. In addition to its flagship soda, Coca-Cola produces a number of non-alcoholic beverages and also sells bottled water. Coca-Cola has long been a staple in the U.S. and elsewhere and has long-term potential staying power.

3. Consolidated Edison

Consolidated Edison Van
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Utility company Consolidated Edison (ED) has increased its dividend payments each year for 46 consecutive years. The energy company provides a variety of power services, mainly in New York and New Jersey.

Utilities are often considered good choices for retirement portfolios, due to their dividends as well as the fact that we rely heavily on them in the U.S. to keep things running.

4. Procter & Gamble

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Procter & Gamble (PG) has been making dividend payouts for 133 years and has increased them for 67 consecutive years. Procter & Gamble is well-known for its consumer products in the areas of beauty and grooming, as well as in feminine care, baby care and health care. Many of the products consumers use on a regular basis are from Procter & Gamble brands, and they are often staples that remain in demand even during recessions and adverse market events.

5. Realty Income Corp.

Realty Income Corp
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Rounding out a retirement portfolio with real estate can help you with diversification over time. Realty Income Corp. (O) has increased its dividends for 31 years. This can be a potentially profitable addition to an investment portfolio, especially since dividends are paid monthly rather than quarterly.

6. Dividend mutual funds

Mutual funds
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Another option is to buy shares of dividend mutual funds. Dividend mutual funds offer instant diversification since they focus on owning shares of many companies that pay out dividends. You buy one share of a mutual fund, and you receive a small slice of ownership in each company included in the fund.

Often, funds have different goals. For example, you can choose a fund that focuses on stable income through dividends or a fund that focuses on dividend growth. Some examples of potential dividend mutual funds include:

  • Vanguard Dividend Appreciation Index Fund Admiral Shares (VDADX)
  • Vanguard Dividend Growth Fund Investor Shares (VDIGX)
  • Federated Hermes Strategic Value Dividend Fund Class A Shares (SVAAX)

It’s important to pay attention to loads (fees charged at the time a fund is bought or sold) and minimums when you invest in dividend mutual funds.

For example, SVAAX has an attractive yield for a mutual fund, but it also comes with a load that you don’t see with the other two funds listed. On the other hand, Vanguard often requires that you make at least a minimum investment on its funds, and you might not be able to meet those minimums. For example, you must invest at least $3,000 upfront to buy either of the Vanguard funds listed above.

7. Dividend exchange-traded funds (ETFs)

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For those looking for dividend funds that can be more easily traded and may offer the chance for you to get into them with smaller amounts of money, dividend ETFs can be a viable choice. With an ETF, you have exposure to dividend-paying assets, but you don’t actually own shares of the underlying investments. However, expense ratios can be lower than with mutual funds. Also, rather than the investment trading once a day as mutual funds do, you can set market orders for ETFs.

Some examples of dividend ETFs include:

  • iShares Select Dividend ETF (DVY)
  • ProShares S&P 500 Dividend Aristocrats ETF (NOBL)
  • Global X SuperDividend ETF (SDIV)

Even though some ETFs have higher dividend yields, be careful about relying only on yield. Higher yields aren’t always stable, and there’s nothing stopping a company or an ETF from cutting its dividend in the future, leaving you without the dividends you’re expecting to fund your retirement.

There are a lot of choices when it comes to dividend stocks that can provide you with income in addition to capital appreciation. Carefully research your options and consider adding investments that are most likely to help you reach your goals.

As always, working with a finance professional is a good idea to ensure you are making the best decisions possible.

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