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3 Dividend-Growth Stocks To Power Your Retirement Portfolio

If you’re among those savers who have to plan for their retirement journey solo, then unfortunately, you won’t find many high-yielding opportunities to earn a decent income stream.

In an environment of persistently low interest rates, savings accounts pay close to zilch, while the return on government bonds has been extremely small. This situation is unlikely to change any time soon, as governments and central banks keep interest rates at, or near, zero to shore up the economy against the fall-out from the pandemic.

However, investing in dividend-growth stocks offers one way to build up wealth for your golden years. Companies that offer regular dividend increases tend to run mature businesses that could provide stability and growth for your portfolio. Keeping these benefits in mind, we’ve picked three dividend-growth stocks to consider.

1. Procter & Gamble

Consumer staple giant Procter & Gamble (NYSE:PG), is a great income-stock worth stashing in a buy-and-hold portfolio, where it can sit quietly and earn growing pay-outs for an investor. P&G stock, which closed yesterday at $118, currently yields 2.68%. It has increased its dividends for 61 consecutive years, a track record few companies can match.

This consistent dividend growth also shows how powerful the company’s cash-flow generation is. Its range of products, which includes such globally recognized brands as Pampers diapers, Tide laundry detergent, and Charmin toilet paper, is strong enough to sustain revenue growth through wars, recessions and market downturns.

The strength of P&G’s consumer brands was evident during the current health crisis. The consumer giant has been among the few companies that has maintained their full-year earnings guidance throughout the pandemic, benefiting from the panic-buying of toilet paper and cleaning products, as the COVID-19 virus spread.

With a pay-out ratio of 66%, the company has enough space to continue growing its income stream for investors. Over the past decade, pay-outs have doubled to $0.79 per share quarterly.

Daily Procter & Gamble Shares

Daily Procter & Gamble Shares

2. Coca-Cola

Coca-Cola Company (NYSE:KO) is one of the best dividend-growth stocks to own and earn quarterly income cheques.

The world’s largest beverage company owns, or licenses, over 500 soft drinks including sodas, bottled water, juices and iced teas. It sells its products in more than 200 countries and has 21 individual brands that generate $1 billion or more in annual sales such as Sprite, Minute Maid and Fuze Tea. It’s also the market leader across a number of its core product categories.

Coca-Cola has been able to increase its dividend for 56 years in a row. That’s more than enough proof of the strength of the brand, as well as the company’s ability to perform during recessions, market downturns and changing consumer preferences.

The current weakness in the company’s stock due to the COVID-19 crisis, in our view, offers a good entry-point to income investors. The effects of social-distancing measures and lockdowns have hurt sales primarily outside the home, as stadiums and entertainment centers, where the company gets about half of its revenue, remain closed.

But that demand-shock is temporary and investors can pick a nice 3.52% dividend yield if they buy KO stock now. Earlier this year, Coca-Cola boosted its quarterly dividend by 2.5% to $0.41 a share. The stock closed yesterday at $46.50, down 16% for the year.

Daily Coca-Cola Shares

Daily Coca-Cola Shares

3. Walmart

One way to position your portfolio to earn stable dividend income is to include companies that produce, or sell, products and services that are crucial to our daily lives. Giant retail companies like Walmart (NYSE:WMT) fit the bill.

The logic is that in times of economic recession, you may cut your fine dining budget, but there’s little chance you’ll scrimp on basic grocery-shopping. This built-in protection makes the world’s largest brick-and-mortar grocer, Walmart, a great dividend-growth stock.

In the latest earnings report, Walmart showed investors how it’s ideally positioned to get through one of the toughest economic environments of our time.

Both its top and bottom lines exceeded analysts’ expectations, while e-commerce sales jumped 74% year-over-year, doubling from the previous quarter’s pace of 35%.

The retailer has an impressive track record when it comes to returning cash to its investors. Early this year, Walmart announced a 4% increase in its quarterly dividend pay-out to $0.54 per share, for a 1.8% yield.

With this increase, Walmart has raised its pay-out every year for the past 46 years. A regularly increasing dividend provides a good hedge and protects the value of your investment from erosion by inflationary pressures.

Walmart is currently trading at $118.17, little changed for the year. In our view, this is not a bad time to buy, as the company is succeeding in its plan to attract more online customers, facing up to the growing threat of competition from Amazon (NASDAQ:AMZN).

Daily Walmart Shares

Daily Walmart Shares

Bottom Line

Buying dividend-growth stocks should be a critical component of your investing strategy for retirement. Their steadily increasing pay-outs will help expand wealth, while providing a hedge against economic uncertainty.

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