5 of the safest dividend-paying stocks retirees can buy right now

While there are many ways to make money on the stock market, few have been proven to be more effective than investing in dividend-paying stocks. A study by JP Morgan Asset Management, a subsidiary of JPMorgan Chase, showed that companies initiating and increasing their payments between 1972 and 2012 achieved an average annual return of 9.5%. In comparison, non-dividend-paying stocks generated a meager annualized return of 1.6% over the same 40-year period.

Dividend stocks are a particularly smart investment idea for retirees. With core inflation recently reaching an almost three-decade high, it is important for older people to continue building their nest egg to offset rising prices. At the same time, retirees also want to make sure that their initial investment is well protected.

The good news is that there are plenty of low risk, high income stocks that retirees can choose from. Below are five of the safest dividend-paying stocks retirees can buy right now.

NextEra Energy: 1.8% yield

Electricity stock NextEra Energy (NYSE: NEE), the largest utilities company in the United States by market capitalization, is a perfect example of a safe stock that seniors can add to their portfolios without worry.

Usually, electric utilities have returns of 3% or more. The reason NextEra is so weak has to do with the fact that the company’s shares are outperforming its peers. Since the return is a function of the payout relative to the share price, a rise in the share price will reduce the return. Over the past 10 years, NextEra shares have grown 529%, not including the dividend.

What really separates NextEra from its competitors is its massive investments in renewable energy. No US utility generates more wind and solar capacity than NextEra. While these investments in green energy don’t come cheap, they help lower the company’s power generation costs and boost its potential for high-figure profit growth. Traditionally, electric utilities have grown at a low single-digit rate.

Yet the company also benefits from the highly predictable cash flow associated with its regulated utilities (i.e. those that are not powered by renewables). Since the demand for electricity and natural gas does not fluctuate much from year to year, NextEra is a solid bet to deliver stable returns over the long term.

Verizon Communications: 4.7% return

If extremely low volatility and a yield crushing inflation are more what you’re looking for, the telecommunications giant Verizon (NYSE: VZ) could be the perfect stock for retirees.

It’s been a decade since wireless download speeds have been dramatically improved for businesses and consumers. The ongoing deployment of 5G infrastructure is expected to result in a multi-year technology upgrade cycle and a significant increase in data consumption. As Verizon relies on transparent and predictable cash flow from its wireless customers and data is the primary driver of its wireless margins, 5G is expected to be a constant source of organic growth.

Additionally, Verizon has spent aggressively to acquire the 5G mid-band spectrum. The purpose of acquiring this bandwidth is to strengthen its 5G home broadband services. By the end of 2023, Verizon aims to have its 5G broadband in up to 30 million US homes.

Verizon might be a slow growing, boring company, but it’s often a recipe for an above-market dividend with minimal volatility.

IBM: 4.8% return

A pillar of technology IBM (NYSE: IBM) is another extremely safe dividend-paying stock that should be able to generate modest long-term returns for retirees. IBM’s return is around 5%, and the company’s quarterly payout has more than doubled over the past decade.

A quick glance at IBM’s stock price performance since 2013 would leave most investors disappointed. This is because the company has waited too long to focus on cloud services. But thanks to a number of internal acquisitions and innovations, IBM’s new focus on hybrid cloud services once again has the needle pointed higher for Big Blue. Hybrid cloud, which combines public and private clouds and allows seamless sharing of data between the two, is expected to be especially popular given that so many people are working remotely.

It’s also worth pointing out that IBM has done a good job of cutting costs in its legacy software segments. Even if its traditional solutions are expected to see their sales fall in the years to come, the margins of these segments remain solid. The abundant cash flow generated by IBM’s legacy operations is fueling share buybacks, its hefty dividend, and targeted acquisitions.

AGNC Investment Corp. : 9% yield

Retirees hungry for super high yield dividend stocks with below average risk should consider buying a mortgage real estate investment trust AGNC investment company (NASDAQ: AGNC) at present. AGNC has a 9% return, pays a monthly dividend and has had an average double-digit return in 11 of the past 12 years.

Mortgage REITs like AGNC borrow money at lower short-term lending rates and use their capital to buy higher-yielding long-term assets, such as mortgage-backed securities. The objective is to maximize the net interest margin, i.e. the difference between the yield received from MBS and the average borrowing rate. The good news for AGNC and the mortgage REIT industry as a whole is that the net interest margin tends to increase during the early stages of an economic recovery.

In addition, AGNC invests almost exclusively in agency securities. These are assets backed by the federal government in the event of default. As you can imagine, having this extra protection reduces the return potential of agency securities. However, it also allows AGNC to use leverage to its advantage in order to strengthen its profit potential. It is one of the safest super high yielding stocks that investors can buy.

Johnson & Johnson: 2.5% yield

Finally, the health conglomerate Johnson & johnson (NYSE: JNJ) is a smart choice for retirees. Although its 2.5% return is eclipsed by a few other names on this list, J&J has increased its base annual dividend for 59 consecutive years and is one of only two publicly traded companies to achieve the credit rating. Highly coveted AAA from Standard & Poor’s. .

One of the reasons Johnson & Johnson is such a great investment has to do with the defensive nature of healthcare stocks. Since we can’t choose when we get sick or what disease (s) we develop, the demand for drugs, medical devices, and health products tends to be constant, regardless of how economies perform. American and global. With the exception of the very brief coronavirus crash in March 2020, the J&J share price has not fallen more than 20% below its highest in more than a decade.

Johnson & Johnson’s three core operating segments also bring something important to the table. For example, even though healthcare products are the slowest growing segment, they provide predictable cash flow and strong pricing power. There is also the medical device segment, which is currently growing slowly, but perfectly equipped to take advantage of the aging of the US and global populations. Finally, pharmaceutical products generate most of J & J’s growth and margins. However, given the limited period of brand name exclusivity, the company’s devices and healthcare divisions are critical to its balanced growth.