Earning an income from dividend stocks can help diversify your portfolio and ensure you’re making some type of consistent gains.
Top Dividend Stocks to Maximize Your Retirement
Choosing the best high dividend stocks to use as income-producing investments may be challenging, especially in an economic environment where companies are conserving cash and protecting their assets.
Look for Companies Maintaining Consistent Cash Flow.
One of the prime ways to incorporate this investment strategy alongside other methods of gaining wealth is to focus on companies with reliable business models. If they’re able to maintain consistent cash flow, it increases the odds of paying shareholders a dividend regularly without having to make cuts.
Honing in on industries where consumers keep buying can provide the best results. Here are three stocks fitting that description.
AT&T Inc. (NYSE: T)
The communication industry has been a reliable source for investors who are searching for the best high dividend stocks. AT&T is a leader in this space with a current dividend yield of over seven percent and a long track record of paying dividends to its investors who have diligently held the company’s shares. While its stock price does fluctuate, it has strong branding and loyal customers who purchase its data plans and hardware.
According to the experts at Money Morning, “Communication is the backbone of the global economy, and AT&T will be at the epicenter of the new 5G technology,” which should help the company continue to dominate in this niche.
Increasing its payout every year for the past three decades indicates how well this company has stayed consistent in making dividend payments to investors. Owning shares in this company should provide you with the income you are looking for without worrying about having it reduced.
Another strong indicator of consistency is the buying activity being completed by insiders. Investing in a company where the executives are purchasing millions of dollars worth of shares is a good sign that the company is healthy and has a bright future.
Kinder Morgan Inc. (NYSE: KMI)
While the oil and gas industry has had some volatile moves in 2020, it’s not going anywhere anytime soon. Consumers are still utilizing energy and will need to keep buying products from this industry for the foreseeable future.
One of the most attractive companies providing these items, Kinder Morgan Inc., pays a dividend yielding over 7 percent. Like all of the other companies in this sector, the KMI share price dropped severely when the pandemic hit.
While this may be a disadvantage in the short term, it does provide an opportunity to purchase shares at a lower price, which is what the founder of the company has done.
Since March, the Founder and Chairman Richard Kinder has been on a buying spree. His recent purchase of 300,000 shares shows he’s highly committed to the company and its prospects. Management is expecting over $4.5 billion in distributable cash flow, which should be more than enough to cover the yearly dividend payout.
Altria (NYSE: MO)
Altria is another company providing an eye-catching dividend with a yield of over 8 percent. If you’re looking for a company providing stable cash flow during recessionary periods, you may want to consider tobacco stocks, which are in a recession-resistant industry.
While tobacco companies have opponents and several headwinds to regularly fight, MO has strong branding with familiar names such as Marlboro and Virginia Slims. The company remains a leader in the categories where it sells its products due to its popular tobacco brands and has future growth opportunities.
While the company’s traditional smokable products are a large factor contributing to its revenue figure, MO has made a strong effort to diversify its products’ portfolio by following consumer trends.
Owning the smokeless tobacco brands Copenhagen and Skoal and a 10 percent stake in Anheuser-Busch InBev (BUD) give it less controversial products to draw profits from each quarter. They have also made investments in the Cronos Group, a marijuana producer, and Juul Labs.
The dividend payout ratio for MO is attractive at about 80 percent of adjusted earnings per share. Analysts expect an increase in this figure in the next couple of years, which portrays a positive outlook for dividend growth.
More importantly, Altria’s free cash flow figure has a wide amount of room to cover the company’s dividend payments.
When there is less transparency in the market, it can pay to hold companies where consumers continue to provide a steady flow of profits or insiders are purchasing shares. The odds of a dividend cut are lower with these conditions.