Nearing Retirement? These Stocks Could Pay You for Life

There’s a lot to love about dividend-paying stocks. For one thing, they not only generate regular payouts of cash, but healthy, growing dividend-paying stocks also tend to have stock prices that appreciate over time. Better still, they tend to increase their payouts every year or two as well. And when the economy temporarily heads south, as it occasionally does, most dividend payers will still keep paying you.

Stick with solid dividend-paying stocks for many years, and your portfolio can grow powerfully. They’re great for producing income for retirees, but also great for generating cash that can be invested in younger people’s portfolios. Here are three dividend payers to consider.

1. Starbucks

Starbucks (NASDAQ: SBUX) is a terrific stock for beginning investors to consider — because, unlike, say, biotechnology or high-tech companies, the business is relatively easy to understand. (It can serve experienced investors well, too, of course.) It sells coffee, and it has been able to grow not only by opening more locations, but also by widening its offerings, to include foods, sugary confections, and more. (Indeed, the first Starbucks didn’t sell brewed coffee at all — just coffee beans, tea, and spices, in bulk.)

Today, with a recent market value near $95 billion, Starbucks boasts more than 34,000 stores worldwide, with more than 15,000 in the U.S. and 5,000-plus in China at the end of 2021. The company is big but still growing at a double-digit rate, with revenue up 15% year over year in its second quarter. There are challenges, of course, such as pandemic-driven lockdowns in China, but Starbucks’ long-term potential remains promising.

Starbucks’ shares were recently down some 35% from their 52-week high, with a dividend yield of 2.4%. Its solid payout has been increased at an annual average rate of 14% over the past five years.

2. PepsiCo

PepsiCo (NASDAQ: PEP) is not only a beverage titan, sharing the upper echelon with Coca-Cola, but, unlike Coca-Cola, it’s also a snack titan. It sells products under a host of brand names, such as Doritos, Cheetos, Fritos, Rold Gold, Aquafina, Gatorade, Pepsi-Cola, Mountain Dew, Quaker, Tropicana, Naked, Izze, SoBe, SunChips, and SodaStream — among gobs of others. (Many of its brands generate more than $1 billion in annual revenue — each.)

Despite its size — its market value was recently $235 billion — PepsiCo is still growing at a respectable clip, with organic revenue up 13% year over year in its strong second quarter. (The company defines organic growth as “a measure that adjusts for the impacts of foreign exchange translation, acquisitions, divestitures and other structural changes,” among other things.) The company’s strong brand power, meanwhile, can help it deal with inflationary pressures.

PepsiCo’s shares have been somewhat volatile over the past year but were recently down only 4% from their 52-week high. PepsiCo stock recently sported a dividend yield of 2.7%, and its payout has been increased at an annual average rate of 7% over the past five years.

3. Verizon Communications

The 2.4% and 2.7% dividend yields above are solid, and the fact that they’ve been growing over time at a respectable rate is also good. But if you’re interested in a heftier dividend yield now, take a look at Verizon Communications (NYSE: VZ). Verizon’s shares, which were recently down about 11% from their 52-week high, were recently sporting an attractive dividend yield of 5.1%. That payout hasn’t been growing terribly quickly, though, rising at an annual average rate of 2% over the past five years.

Verizon has a lot going for it, such as its 5G rollout, as it aims to increase its home broadband customers from a recent 6.5 million to 11 million by 2025. My colleague Travis Hoium has suggested that Verizon might do well to bundle various services, such as smartphone service, home broadband service, and even streaming TV channels. In the meantime, Verizon recently held a whopping 44% market share in wireless access.

Verizon may not be the fastest-growing stock, but it’s well poised to keep growing steadily, churning out lots of free cash — more than $10 billion annually, at recent rates. That can help support its dividend payout, though some will be needed to pay down its considerable long-term debt (recently around $140 billion).

The benefits of dividends

Give dividend-paying stocks some strong consideration for your portfolio. Even if you don’t fill your entire portfolio with them, having a sizable chunk of your assets in cash-generating, growing shares of stock can pay off very well. They can be especially good for retirees and near-retirees.

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Selena Maranjian has positions in Starbucks. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends Verizon Communications and recommends the following options: long January 2024 $47.50 calls on Coca-Cola and short July 2022 $85 calls on Starbucks. The Motley Fool has a disclosure policy.

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