3 Dividend Stocks That Could Keep Paying Out For The Rest Of Your Life

Investing for retirement requires a different approach from merely betting on growth or value stocks. The strategy for fixed-income is to buy quality stocks, hold them over the long run and focus on their income-generating capabilities—now and into the future. 

That investing style may seem boring to some, especially in an environment where markets are in a long-term bull cycle and there appears to be no end in sight to this relentless rally. But if your investment goal is to build a solid cash stream for retirement, one that you can count on for the rest of your live, then holding some quality dividend stocks in your portfolio is a great idea.

With these factors in mind, below we've short-listed three stocks that income investors could consider buying now. Each offers solid income potential for long-term investors due to their ample cash reserves, healthy balance sheets and reasonable payout ratios.

1. Procter & Gamble/h2

Consumer staples are a great avenue for retirees to earn steadily growing income without taking too much risk. The logic is simple: in any economic shock, consumers are highly unlikely to stop buying things they absolutely need for day-to-day living, such as, toothpaste, toilet paper and dish-washing liquids.

Procter & Gamble (NYSE:PG), the multinational consumer staple manufacturer, is a stock that fits nicely into this category. The Cincinnati-based company is among that small group of firms considered Dividend Aristocrats—businesses that have, for 25 years or more, consistently and consecutively raised and paid out their dividends. 

In Procter & Gamble's case, that stat is even more impressive: the company has paid a dividend for 131 years, increasing that payout for 64 consecutive years. With its 2.57% annual yield, it now pays $0.87 a share quarterly dividend after a 10% hike last month. And its payout ratio is a solid 56.35%, which means there's more runway to raise the payout going forward.

Shares of P&G have weakened about 3% this year, closing on Friday at $135.15. Still, the manufacturer of Dawn dishwashing soap, Charmin toilet paper, and Pampers has delivered impressive returns over the past five years, gaining 135%, including dividends.

2. Medtronic/h2

Healthcare stocks are considered relatively safe, regarded as solid income producers. Just like retailers, utilities and garbage collectors, healthcare providers offer services that remain necessary even during a recession. Plus, economic swings don’t typically curb the roll-out of new drugs and devices.

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Medtronic (NYSE:MDT) is a lesser known healthcare stock that we like due to the company’s strong market position and its hefty payouts. The world’s biggest medical device maker controls 50% of the global pacemaker market. It’s also a leader in products that assist with spinal surgeries and diabetes care.

No matter which way the economy goes, stocks like Medtronic will continue to churn out cash. The company has a long-term strategy to pay out 50% of its free cash flow to shareholders as dividends. With a 1.83% annual yield, the company pays $0.58 a share quarterly dividend. That payout, on average, has increased over 11% per year during the past five years. As well, the company has a healthy price-to-free cash flow rate of 54.62, lower than the industry average of 86.01.

The Dublin, Ireland-based medical device company is seeing the “best near term set up in years,” according to a recent note from Bank of America. Those positive catalysts include a robust rebound in surgical procedures as the coronavirus pandemic subsides. BoA expects Medtronic to become only the second company behind Intuitive Surgical (NASDAQ:ISRG) to apply for approval of a surgery-assisted robot.

The stock, after gaining 8% this year, closed on Friday at $126.70.

3. Home Depot/h2

Home Depot (NYSE:HD) is one of those retailers that are ideally positioned to continue sending dividend checks to retirees. The home-improvement retailer in recent years invested heavily to prepare itself for the e-commerce onslaught and changing consumer behavior. 

Just before the deadly pandemic hit, the Atlanta-based, home improvement chain had completed an $11-billion restructuring plan to modernize the company’s stores, upgrade digital options, and enhance offerings for its key trade customers. 

Armed with these upgrades, Home Depot will continue to remain in a growth cycle, especially when factors such as a hot real estate market and the changing ways that people use their homes, are fueling sales of home-furnishing and improvement products.  

The company is also a reliable dividend payer. Over the past five years, its quarterly dividend, on average, has expanded 22% per year. With an annual dividend yield of 2%, the company pays a $1.65 a share quarterly payout. And, with a solid payout ratio of 50%, it has much more room to grow.

The stock, which closed on Friday at $339.25, has gained 20% during the past three months.

Written By: Investing.com