This is a guest post by Jonathan Wolfgram, of DividendInvestor.com
The 4 high dividend stocks for your retirement portfolio are made up of a growing Real Estate Investment Trust (REIT), a top financial institution, a title insurance company, and a household-favorite beverage producer.
More and more Americans plan to rely on dividend income during retirement. Yet, the risk associated with many stocks can make this a difficult decision.
Some investors choose stocks with the highest dividend yield, without evaluating the stability and financial viability of the underlying companies. While this can pay off sometimes, your entire retirement fund is too precious to risk on a set of questionable investments.
High dividend stocks are not necessarily volatile or unfit for a retirement portfolio. There exist a few select high dividend stocks with the history and financial stability to back up their impressive dividend distributions.
Listed below are four of these stocks, with both a high dividend and low enough risk to be fit for a great retirement portfolio.
4 High Dividend Stocks for Your Retirement Portfolio: Realty Income
Realty Income (O) is a net lease real estate investment trust (REIT) with long-standing ownership of 6,700 properties across the United States. It primarily rents out single-tenant, freestanding retail properties, giving the company a uniquely low-risk stake in the REIT industry.
Just weeks ago, Realty Income announced the completion of its merger with VEREIT, a smaller real estate investment trust with a similar investment strategy. This merger dramatically increased the size of the company, increasing its market capitalization to more than $41 billion and its portfolio of properties from 6,700 to over 10,000.
The REIT’s newfound size advantage is already allowing it to take on more billion-dollar deals. Although its growth makes impacting the top and bottom line of the company more difficult, the growing number of larger, more profitable deals is allowing Realty Income to absorb more and more of the market share.
Realty Income currently pays a monthly dividend of $0.25, annualizing to $3.00 per share and a dividend yield of 4.1%. This dividend is not only growing but it is remarkably consistent — dividends have been paid out to investors every month since 1994.
4 High Dividend Stocks for Your Retirement Portfolio: B. Riley Financial
B. Riley Financial (RILY) is a diversified financial company offering investment banking services to high net worth clients. It specializes in the disposition, valuation and appraisal of assets for largely retail and financial institutions across North America and Europe.
The company is growing at an alarming rate, and for good reason. B. Riley has a return on equity of 77.2% and earnings per share (EPS) growth of 1,033.1%. Its increasing profit margins and high efficiency have led the company’s share price to rocket 195.1% in the trailing 12 months.
Where a sudden jump of that sort may be a red flag in other companies, B. Riley has maintained this growth rate for the last half-decade. In the trailing three years, the share price grew 496.5%. In the trailing 5 years, it jumped 656.4%.
Alongside this growth is a high dividend payout to match that currently is yielding 5.1%. The company paid out three special dividends in 2021 as well, bringing the total dividend income per share to $12.50 with room to grow.
As B. Riley’s payout ratio is just 9.2%, it has more than enough cash to continue increasing its dividend distribution in the coming years.
4 High Dividend Stocks for Your Retirement Portfolio: Fidelity National Financial
Fidelity National Financial (FNF) is an insurance company that reached new heights during the pandemic and a hyper-bullish real estate market. The business is divided into two core segments: title insurance and venture capital.
The investment division of the company, FNF Ventures, generates nearly 20% of Fidelity National Financial’s total revenue. It is the title insurance division, however, that has grown dramatically in the past 2 years.
As the United States housing market has expanded over the course of the COVID-19 pandemic, the companies insuring those properties have grown along with it. By diversifying in other operations, however, FNF can tie its revenue growth to the housing market while taking on less volatility.
In addition to its title insurance operations, in mid-2020, the company purchased Guaranty Life Insurance Co. This acquisition has allowed it to further diversify into annuities and life insurance products, both of which are also experiencing growing sales.
Fidelity National Financial is a relatively low-risk stock with exposure to the long-term viability of real estate — making it an excellent choice to hold for a long time in a retirement portfolio. Its dividend yield is a healthy 3.4% and distributes a regular quarterly payout of $0.44 per share, with a trend of increasing it year-over-year for the past decade.
4 High Dividend Stocks for Your Retirement Portfolio: The Coca-Cola Company
The Coca-Cola Company (KO) is a famous beverage company. While its flagship product is a household name, the company produces much more than the carbonated drink it is named for. As the largest non-alcoholic beverage operation in the world, Coca-Cola also owns Gold Peak Teas, Dasani Waters, Fresca, Georgia Coffee, Minute Maid and much more.
The latest drink added to its widely diversified portfolio is Bodyarmor. Just weeks ago, Coca-Cola purchased the sports drink company for $5.6 billion, making it the largest acquisition ever made by the company.
This purchase brings Coca-Cola into the sports drink industry and allows for high growth potential as it challenges the market leader Gatorade — owned by competitor PepsiCo (PEP) — which currently holds 70% of the market share.
With Coca-Cola’s core marketing strength, we expect the visibility of Bodyarmor to greatly increase in the coming years, and KO’s bottom line along with it.
Although Coca-Cola is growing at a steady pace due to its expanding product line, the company has a conservative approach to spending and ruthlessly eliminates divisions with lower profit margins. Since 2016, the company has begun outsourcing its bottling operations — which although profitable, were less successful than the franchising and licensing business — to dedicate more resources towards its highest earning competencies.
The company as a whole now has a gross profit margin of 60.7% and a return on invested capital (ROIC) of 16.5%.
Its dividend yield is 3%, paying a quarterly dividend of $0.42, or an annual dividend of $1.68. Coca-Cola has increased its dividend every year for the last 59 years, making it a Dividend Aristocrat.
With Coca-Cola’s current growth strategy, alongside a host of stable financials, this rising-dividend trend is likely to continue for years to come.
Jonathan Wolfgram is an investment analyst who writes for www.dividendinvestor.com and www.stockinvestor.com.
