3 dividend stocks to make retirement a breeze

By | February 24, 2024

With markets hitting new highs at the start of the year, some investors may be looking to increase passive income from their investments. When finding the right dividend stocks to buy, investors usually can’t go wrong by sticking with leading companies that have been around for years.

That said, let’s take a look at why three Motley Fool contributors believe this Coca-Cola (NYSE: KO), DIY store (NYSE:HD)And Real estate income (NYSE:O) are great income stocks to buy now.

An excellent record of dividend growth

John Ballard (Coca-Cola): Successful dividend investing is all about looking for a track record in the field of sustainability. Coca-Cola has been around since 1886 and has increased its quarterly dividend for 63 years in a row. The stock currently offers a yield of 3.17%, higher than the consumer staples average of 1.89%.

Coke benefits from a large brand portfolio, including carbonated drinks, juices and teas. The strength of these brands translates into enormous sales volumes every year, with more than 2.2 billion servings of the beverage products consumed worldwide each year. That makes it an ideal dividend share to increase the average return of your investment portfolio.

Investors can expect the dividend to continue to grow. With several international markets still in the development stages of spreading more soft drink consumption, Coca-Cola unit sales volume likely has a long path of growth ahead. That’s one reason why management believes it can achieve annualized revenue growth of 4% to 6% and earnings growth of 7% to 9%.

The shares are fairly valued at a price-earnings ratio of 21.7. When we combine the stock’s 3%+ yield with high-single-digit earnings growth potential, investors can expect a low double-digit return on their investment over the long term.

Don’t be fooled by the delay

Jeremy Bowman (Home Depot): Home Depot has dominated the home improvement retail industry for a generation and shows little sign of relinquishing its leadership.

Demand for Home Depot’s products, including raw materials such as lumber, power tools, garden supplies, appliances and fixtures, isn’t going anywhere, and a large portion of sales are Amazon-proof, with high barriers to entry.

The company should also benefit from a housing shortage in the coming years, as some economists estimate the U.S. needs an additional 4 million housing units to reach market equilibrium and meet demand. The company estimates that its addressable retail home improvement market is worth $950 billion.

Recent results at Home Depot are not encouraging as the housing market has been cyclically weak. The company just completed a year in which comparable sales fell 3.2% and revenue fell 3%. That weighed on operating income, as earnings per share fell 9.5% to $15.11.

CEO Ted Decker described 2023 as a year of moderation, and management expects similar headwinds in 2024, calling for revenue growth of just 1%, including the benefit of a 53rd week, and a 1% increase in earnings per share .

However, Home Depot should return to steady growth once interest rates fall and the housing market strengthens. The company also remains a loyal dividender. It just declared its 148th consecutive quarterly dividend, a streak that dates back to the company’s early days. It currently offers a dividend yield of 2.3% and has a history of strong dividend increases, typically in double-digit percentages.

If you’re looking for a dividend stock that you can enjoy into retirement, Home Depot seems like a great choice, with its resilient business model and history of dividend increases, and now seems like a good time to buy while the stock is in a cyclical downturn .

Get a reliable monthly check with this standout REIT

Jennifer Saibil (real estate income): Every retirement account should include some real estate investment trust (REIT) stocks, and Realty Income stands out as one of the best. It has everything a dividend investor should look for: high returns, a proven track record of dividend increases, and reliability. It also has something that most other dividend stocks can’t boast: it pays monthly.

REITs are a class of stocks that own properties, usually of a specific type. They pay out 90% of their income as dividends, which makes them ideal for passive income. Realty Income is a retail REIT and leases space to major retail chains such as Walmart (NYSE:WMT) And Lowe’s (NYSE: LOW). It has made two major acquisitions and several sale-leaseback deals in the past two years that have added thousands of new properties to its total, and it has expanded into new areas such as gaming, with a sale-leaseback deal with Wynn Resorts (NASDAQ: WYNN).

It is highly diversified, with 1,326 tenants in 86 sectors. However, 81% are in retail. Its largest industries and tenants are resilient businesses and it consistently reports occupancy rates near 100%.

Realty Income shares are down 21% in the past year due to the depressed real estate market. But Realty Income is well capitalized to buy more properties, reporting adjusted funds from operations of $4 in 2023, up from $3.92 the year before. The company can weather the turbulence in the real estate sector well and is well positioned to sustain it for the foreseeable future.

At this price, Realty Income’s dividend yields 5.6%. It has paid a dividend for 644 months in a row – that’s more than 53 years – with 105 quarterly increases. It adds properties and income and sees big opportunities ahead, and it’s a top choice for reliable passive income.

Should You Invest $1,000 in Coca-Cola Now?

Before you buy Coca-Cola stock, consider the following:

The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Coca-Cola wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

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Jennifer Saibil has no positions in any of the stocks mentioned. Jeremy Bowman has no position in any of the stocks mentioned. John Ballard has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Home Depot, Realty Income, and Walmart. The Motley Fool recommends Lowe’s Companies. The Motley Fool has a disclosure policy.

3 Dividend Stocks to Make Retirement a Breeze was originally published by The Motley Fool

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