Top Dividend Stocks For The Ultimate Retirement Portfolio

Cagdas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Each one of us dream of sitting on our seats next to the fireplace talking to our grandchildren when we are retired, while our investments are filling our pockets. That is one sweet goal of every of us, and it is never unachievable. It's all about knowing where to invest for the latter part of your life.

For me, one of the best ways of calculating fair value estimation is to discount the future earnings for a five-to seven year period. You should not forget about nifty dividend checks, as well.

If you're planning to constitute a retirement portfolio, then dividends and/or a lined-up cash flow from dividends has to be vital for you. A fruitful retirement portfolio demands solid and consistent dividend income. Therefore, I have found the top yield companies operating in the States and are engaged in consumer goods, services, basic materials, technology and healthcare sectors. I have excluded the financials as they show too much volatility to be on a retirement portfolio. The arranged list comprises 21 companies that paid a dividend yield of at least 5%* in the last year. They also have P/E ratios under 20 and a minimum market cap of $2 billion, which means that these stocks are significantly better in terms of profitability than their peers. Stock market data is compiled from Google Finance,MorningstarYahoo Finance and Finviz. Following is the ultimate dividend list:

*(I had to reduce min. dividend yield level to 4% in services, healthcare and technology sectors as no company with the above-listed requirements showed up.)

<table> <tbody> <tr> <td> <p><strong>Stock</strong></p> </td> <td> <p><strong>Sector</strong></p> </td> <td> <p><strong>P/E/Industry Avg.</strong></p> </td> <td> <p><strong>Yield/Industry Avg.</strong></p> </td> <td> <p><strong>Beta</strong></p> </td> <td> <p><strong>YTD Return</strong></p> </td> </tr> <tr> <td> <p>Altria Group (NYSE: MO)</p> </td> <td> <p>Consum. G.</p> </td> <td> <p>17.7/17.6</p> </td> <td> <p>5.14%/4.2%</p> </td> <td> <p>0.42</p> </td> <td> <p>9.44%</p> </td> </tr> <tr> <td> <p>Reynolds American (NYSE: RAI)</p> </td> <td> <p>Consum. G.</p> </td> <td> <p>17.5/17.6</p> </td> <td> <p>5.32%/4.2%</p> </td> <td> <p>0.58</p> </td> <td> <p>5.86%</p> </td> </tr> <tr> <td> <p>Lorillard, Inc. (NYSE: LO)</p> </td> <td> <p>Consum. G.</p> </td> <td> <p>14.2/17.6</p> </td> <td> <p>5.21%/4.2%</p> </td> <td> <p>0.41</p> </td> <td> <p>2.03%</p> </td> </tr> <tr> <td> <p>Pitney Bowes (NYSE: PBI)</p> </td> <td> <p>Consum. G.</p> </td> <td> <p>6.4/14.2</p> </td> <td> <p>10.84%/2.5%</p> </td> <td> <p>1.18</p> </td> <td> <p>28.29%</p> </td> </tr> <tr> <td> <p>Williams Partners (NYSE: WPZ)</p> </td> <td> <p>Basic M.</p> </td> <td> <p>19.6/31.3</p> </td> <td> <p>6.38%/4.5%</p> </td> <td> <p>1.11</p> </td> <td> <p>3.16%</p> </td> </tr> <tr> <td> <p>Energy Transfer (NYSE: ETP)</p> </td> <td> <p>Basic M.</p> </td> <td> <p>10.7/31.3</p> </td> <td> <p>7.76%/4.5%</p> </td> <td> <p>0.66</p> </td> <td> <p>7.08%</p> </td> </tr> <tr> <td> <p>Enbridge Energy (NYSE: EEP)</p> </td> <td> <p>Basic M.</p> </td> <td> <p>15.3/31.3</p> </td> <td> <p>7.37%/4.5%</p> </td> <td> <p>0.69</p> </td> <td> <p>5.05%</p> </td> </tr> <tr> <td> <p>El Paso Pipeline (NYSE: EPB)</p> </td> <td> <p>Basic M.</p> </td> <td> <p>16.8/31.3</p> </td> <td> <p>6.00%/4.5%</p> </td> <td> <p>0.24</p> </td> <td> <p>8.46%</p> </td> </tr> <tr> <td> <p>Cliffs Natural (NYSE: CLF)</p> </td> <td> <p>Basic M.</p> </td> <td> <p>5.8/13.7</p> </td> <td> <p>6.70%/2.6%</p> </td> <td> <p>2.40</p> </td> <td> <p>-5.54%</p> </td> </tr> <tr> <td> <p>Terra Nitrogen (NYSE: TNH)</p> </td> <td> <p>Basic M.</p> </td> <td> <p>14.7/15.9</p> </td> <td> <p>6.95%/1.6%</p> </td> <td> <p>0.78</p> </td> <td> <p>13.31%</p> </td> </tr> <tr> <td> <p>Alliance Holdings (NASDAQ: AHGP)</p> </td> <td> <p>Basic M.</p> </td> <td> <p>15.4/13.7</p> </td> <td> <p>5.80%/2.6%</p> </td> <td> <p>0.77</p> </td> <td> <p>6.13%</p> </td> </tr> <tr> <td> <p>Northern Tier Energy (NYSE: NTI)</p> </td> <td> <p>Basic M.</p> </td> <td> <p>6.1/12.2</p> </td> <td> <p>6.01%/1.4%</p> </td> <td> <p>N/A</p> </td> <td> <p>6.17%</p> </td> </tr> <tr> <td> <p>TC Pipelines (NYSE: TCP)</p> </td> <td> <p>Basic M..</p> </td> <td> <p>16.4/31.3</p> </td> <td> <p>7.14%/4.5%</p> </td> <td> <p>0.49</p> </td> <td> <p>8.17%</p> </td> </tr> <tr> <td> <p>Natural Resource Partners (NYSE: NRP)</p> </td> <td> <p>Basic M.</p> </td> <td> <p>17.5/N/A</p> </td> <td> <p>10.00%/3.8%</p> </td> <td> <p>0.81</p> </td> <td> <p>18.66%</p> </td> </tr> <tr> <td> <p>Alliance Resource Partners (NASDAQ: ARLP)</p> </td> <td> <p>Basic M.</p> </td> <td> <p>10.1/N/A</p> </td> <td> <p>7.01%/3.8%</p> </td> <td> <p>0.80</p> </td> <td> <p>8.81%</p> </td> </tr> <tr> <td> <p>Merck & Co. (NYSE: MRK)</p> </td> <td> <p>Healthcare</p> </td> <td> <p>18.7/18.0</p> </td> <td> <p>4.11%/3.6%</p> </td> <td> <p>0.58</p> </td> <td> <p>0.31%</p> </td> </tr> <tr> <td> <p>Darden Restaurants (NYSE: DRI)</p> </td> <td> <p>Services</p> </td> <td> <p>13.5/20.6</p> </td> <td> <p>4.23%/2.0%</p> </td> <td> <p>0.84</p> </td> <td> <p>5.12%</p> </td> </tr> <tr> <td> <p>Gannett Co. (NYSE: GCI)</p> </td> <td> <p>Services</p> </td> <td> <p>10.1/17.0</p> </td> <td> <p>4.14%/3.0%</p> </td> <td> <p>2.50</p> </td> <td> <p>18.01%</p> </td> </tr> <tr> <td> <p>Cedar Fair (NYSE: FUN)</p> </td> <td> <p>Services</p> </td> <td> <p>19.6/24.2</p> </td> <td> <p>4.10%/1.7%</p> </td> <td> <p>1.31</p> </td> <td> <p>16.29%</p> </td> </tr> <tr> <td> <p>Intel Corp. (NASDAQ: INTC)</p> </td> <td> <p>Technology</p> </td> <td> <p>9.3/21.8</p> </td> <td> <p>4.22%/2.2%</p> </td> <td> <p>1.02</p> </td> <td> <p>0.68%</p> </td> </tr> <tr> <td> <p>CA Tech (NASDAQ: CA)</p> </td> <td> <p>Technology</p> </td> <td> <p>12.5/25.4</p> </td> <td> <p>4.03%/1.7%</p> </td> <td> <p>1.04</p> </td> <td> <p>12.60%</p> </td> </tr> <tr> <td> <p><strong>Total / Average</strong></p> </td> <td> <p> </p> </td> <td> <p><strong>13.70</strong></p> </td> <td> <p><strong>6.11%</strong></p> </td> <td> <p><strong>0.887</strong></p> </td> <td> <p><strong>8.48%</strong></p> </td> </tr> </tbody> </table>

As you can see from the chart, almost all of the listed companies offer P/E ratios and dividend yields much better than their peers, indicating that they all overperformed these benchmarks. Their dividend offers are quite attractive for an investor constituting a retirement portfolio. They have also proved themselves to be performing well currently with their significant 2013 YTD returns.

The year-to date performance average of the companies listed above is 8.48%, which is a little much as 2013 had a fruitful start. Markets went greener with a promising jobs market report, resulting in rises in all groups of the S&P 500, as well as the Dow Jones Industrial Average. The prices might seem a little bit high, but if you are here for picking stocks that will reward you for years, than a few pennies should not be a problem for you. If you still want to grab them at more reasonable levels, I suggest you keep an eye on them until they drop to desired prices of yours.

Pitney Bowes showed the highest YTD (year-to date) performance of 28.29% since. The company enjoyed a significant EPS growth of 96.17% last quarter. Natural Resource Partners comes next with a year-to date performance of 18.66%, followed closely by Gannett Co. at 18.01%. Investors relying on momentum should give them a look before they get hotter.

The company offering the highest Beta value in this list is Gannett (2.50). An average Beta value of 0.887 implies that most of these stocks listed above are irresponsive to volatility. These stocks can reward investors with both safe and profitable returns. Out of twenty one companies listed above, fourteen of them have Beta values lower than 1.00.

Analysts estimate positive annual 5-year EPS growths for almost all of these companies. They all reported positive profit margins as well, which is 22.5% on average. TC Pipelines (71.26%), Terra Nitrogen Co. (69.79%), El Paso Pipeline (38.88%), Natural Resource Partners (37.36%) and Energy Transfer Partners (28.88%) hold the highest profit margins in the list.

El Paso Pipeline owns the highest 5-year EPS growth with a reputable rate of 115.87%, followed by CA Tech with a much lower 5-year growth rate of 53.77%. Terra Nitrogen Co. ranks third in the list with a rate of 44.34%. The average five-year EPS growth percentage of these companies is 13.63%.


Fool blogger BargainReporter does not own shares in any of the companies mentioned in this entry.

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