If you are entering or approaching retirement, you had better accept the new investment reality of low-risk and long-term thinking. Your days of gambling and taking chances for higher returns are over.
Even some dividend-paying stocks are out of our risk envelope. When it comes to large-cap dividend payers, your choices have to include firms with a stable, long-term outlook and improving fundamentals. But, that doesn’t mean you have to suffer through years of underperformance.
Four high-paying dividend stocks that meet all or most of our requirements were profiled in a recent Wall Street Journal article. Each is a perfect example of the kind of stock you have to hold in your retirement portfolio.
These are companies with long-term stability and reliable income, and are able to be held for the long term.
Cigarettes
They may not be your cup of tea, and certainly aren’t essential, unless you’re addicted to them, but from an investment perspective they are golden, and Lorillard (NYSE: LO) is at the top of the list. It sports top- and bottom-line growth, a 5% yield, a low P/E ratio, excellent growth estimates just below 10%, and, despite the smoking bans here at home, most of the world is still puffing away.
Telephones
AT&T (NYSE: T) has a reliable history of boosting its dividend and currently boasts a 5% yield. The company is not growing quickly, but with a Beta of 0.4, it offers stability, which is what we are looking for. Plus, it offers a forward earnings multiple in the low teens. That means the stock is not overpriced.
AT&T and Verizon (NYSE: VZ) are and will continue to be the two dominant players in wireless. Both are suitable for your portfolio.
Utilities
Southern Company (NYSE: SO), an electric utility, is a long-term play with a solid history of dividend increases and pays a 4.5% dividend, and its beta of 0.1 screams stability. This is a long-term income play with virtually no worries.
Lockheed Martin (NYSE: LMT) shows up on most retirement radar screens. It has the highest dividend yield of all big caps and is making the necessary changes in its business plan to make up for future military spending cuts. The aerospace and defense divisions may be smaller earners for the company in the years to come, but they aren’t going anywhere. And that protects Lockheed from many macro events. And, billionaire Ken Griffin doubled his holding in the stock in the first quarter of this year. That’s good company.
A low Beta, a history of dividend increases, improving fundamentals, solid growth prospects and essential industries – this is how to be safe and make money long term. Get out of the gambling mode and get stable.