5 Dividend Stocks For Retirement Income

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

For those of us closing in on retirement one of the more important things on the to-do list should be preparation of the portfolio for income once you finally stop trudging to the office each day. You will probably need to supplement payouts from your pension, assuming you have one, and Social Security. 

With yields on bank accounts, CD's, and Treasury bonds and bills at historic lows; you may need more income than those investments can offer right now. 

In my mind the best way to attain income is dividend paying stocks. One of the reasons is that I don't want a money manager or financial planner doing my work for me. I'd rather do it myself and save on commissions and fees; thank you very much. In addition to a dividend, an individual stock will also have some growth potential and keep up with inflation.

Ideally, you probably don't want to enter the market less than three to five years prior to when you actually need the money, in case a crash robs you of your capital. You may need time recover from that. 

So here we go. 

One of the best places to look are the Dividend Aristocrats. The 51 stocks on the 2012 list have been paying and increasing dividends for at least 25 consecutive years. It is likely that most will continue to keep increasing their payouts in the future. The number of stocks coming off the list during any one year has traditionally been small compared to the number being added. For this year, one stock was removed and ten were added. For the full list of aristocrats, go here

I started adding more dividend payers to my portfolio several years ago and will continue to do so over the next few years. Most are aristocrats.

Here is a sampling of some dividend paying stocks that you may want to look at:

1. AT&T (NYSE: T)

This telecommunications giant with a market cap of $218B has one of the most widely held stocks and was just added to the aristocrats. It has a yield of 4.6% at the current share price. The stock has seen a run-up of over 30% in the last year. Some of that is due to an exponential rise in wireless data use. Can AT&T keep increasing its dividend? Well, I wouldn't bet against them as they have been increasing them since 1987.

Holding 1,000 shares will result in $1,176 in annual income. 

2. Johnson & Johnson (NYSE: JNJ)    

This pharmaceutical and consumer products company is what I consider a classic stock, performing at a high level over a long period of time. It was founded in the 1800's and sells such products as Johnson's baby shampoo, Luden's cough drops, and Band-Aids. The dividend seems sustainable too, as the payout ratio is about 70%. 

Holding 1,000 shares, which currently yield 3.5%, allows you to collect $2,440 annually in dividends.

3. Coca-Cola (NYSE: KO)

Here's another classic company. It has paid a dividend for the last 92 years and increased it every year for the last 50. It has a presence in almost every country on Earth and sells over 500 brands, including the best known in history, Coke. The company has a strong balance sheet and has consistently grown earnings and free cash flow which should allow it to continue the dividend growth in the future.

Owning 1,000 shares will provide you with an income of $1,000 a year.

4. ExxonMobil (NYSE: XOM)

This diversified energy monster currently is ranked number one on the Fortune 500 list by revenue. It also has the number two market cap. Earnings have grown by 2/3 and revenues doubled over the last few years. Plenty of cash will allow it to keep those dividends flowing. 

An investment of 1,000 shares will pay you $2,280 a year.

5. Automatic Data Processing (NASDAQ: ADP)

This company provides services to other businesses in such areas as human resources and payroll. As more and more organizations outsource those types of functions and as the labor market continues its slow, painful recovery expect ADP to increase revenues and earnings going forward. Lots of cash and low debt will help ensure increased payouts in the future.

You can expect $1,580 annually if you hold 1,000 shares.


As you near retirement (or even if it's a few years away) don't forget to think about income needs. One of the sure fire ways to find that consistent flow of money are dividend paying stocks. And there is probably no better place to look than the Dividend Aristocrats. 



Mathman6577 owns shares of Johnson & Johnson, AT&T, and The Coca-Cola Company. The Motley Fool owns shares of Johnson & Johnson and ExxonMobil. Motley Fool newsletter services recommend Automatic Data Processing, Johnson & Johnson, and The Coca-Cola Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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