Duke Energy (DUK) Pays Steady Dividends for Retirement Portfolios
Duke Energy (DUK) is a popular holding in many retirement portfolios because of the company’s generous and dependable dividend. Duke Energy has paid uninterrupted dividends for more than 90 years and increased its payout each calendar year since 2005. With a dividend yield above 4%, a high Dividend Safety Score, and low stock price volatility, Duke Energy is worth a closer looks. Let’s review Duke Energy’s business and dividend profile to see if the company is a solid candidate for investors living off dividends in retirement. Business Overview Duke Energy’s history dates back to the early 1900s, and the company is largest electric utility in the country today with over $23 billion in annual revenue and [...]
4% Rule Versus Dividend Stocks: What’s Best for a Safe Retirement?
For the last few decades, the 4% rule has served as the cornerstone of modern retirement theory. However, with 10,000 baby boomers retiring every day and 59% of Americans worrying about being able to afford retirement, in recent years many have begun to question whether or not this rule of thumb is still the best chance at maintaining a comfortable income in their golden years. Let’s take a closer look at the pros and cons of the 4% rule, as well as if high-yield, dividend growth investing may be an appealing alternative choice to consider for meeting your long-term income needs. What is the 4% Rule? The 4% rule is derived from the work of William Bengen, an [...]
Higher Interest Rates Impact Utilities: What Dividend Investors Need to Know
Higher interest rates create a number of risks and opportunities for investors in the utility sector. Utilities have long been a staple for low risk income investors, such as those that live off dividends during retirement. That’s because most utilities have long track records of highly secure and slowly growing dividends, thanks to their stable cash flows. In fact, some utilities are even dividend aristocrats and dividend kings, meaning they have raised their dividends every year for 25 and 50 consecutive years, respectively. In the past decade, however, record low interest rates have acted as a real growth tailwind, helping these stable electric, water, and gas companies borrow at ultralow interest rates. In addition, yield-starved [...]
Higher Interest Rates Impact MLPs: What Dividend Investors Need to Know
Higher interest rates have a number of implications for investors in master limited partnerships (MLPs). Record low interest rates over the last decade have created major challenges for income investors, who through 2007 had enjoyed generous yields on risk-free investments such as savings accounts, money market funds, CDs, and U.S. Treasury bonds. Today, many of those assets offer paltry or even negative interest rates, helping explain why MLPs have become increasingly popular during this time of low interest rates. These (generally) energy-focused infrastructure stocks are structured in such a way as to pay generous and often growing yields. Thus they have become a major staple in many investors’ dividend retirement portfolios. However, thanks to the [...]
Higher Interest Rates Impact REITs: What Dividend Investors Need to Know
Many dividend investors wonder how higher interest rates will impact REITs, and for good reason. Over the past few years, interest rates have fallen to their lowest levels in recorded history. This has created a challenging environment for income investors who previously enjoyed healthy, low-risk returns from money market funds, CDs, and Treasury bonds. In fact, since the darkest days of the financial crisis, many yield-starved investors have been forced to search elsewhere for their income needs, including bond alternatives such as real estate investment trusts (REITs). As a result, the entire real estate industry outperformed the market even during one of the longest and strongest bull markets in history. Since March 2009, the Vanguard [...]
General Mills (GIS): A Safe Dividend Stock Down 15% Since July
General Mills (GIS) is a blue chip stock that has paid uninterrupted dividends for 117 years. The company’s dividend has increased each year since 2004 and boasts a 10.4% annual growth rate over the last decade. Despite General Mills’ impressive history, the company’s stock price is down more than 15% since early July 2016 while the S&P 500 Index has gained over 13%. With investors’ expectations reduced and the stock’s 3.2% dividend yield sitting above its five-year average yield, now is a good time to review why General Mills remains a core holding in our Conservative Retirees dividend portfolio. Business Overview General Mills went into business in 1866, owning just a single flour mill at the [...]
GameStop (GME): A 6% Yield, But is the Dividend Safe?
At a glance, GameStop (GME) is a tempting dividend stock for retired income investors. GameStop offers a high dividend yield in excess of 6% and has increased its dividend every year since initiating its dividend program in 2012. The company has a healthy payout ratio near 40% and consistently generates positive free cash flow as well. But at the same time, it’s important to note that high yields, especially in this time of historically low interest rates, can be a red flag that a company is a “value trap,” meaning that something is deeply flawed about its business model. Let’s take a look at GameStop’s high yield using our Dividend Safety Scores to see if the [...]
Brookfield Infrastructure Partners (BIP): A High-Yield, Fast-Growing Utility
Utilities are one of the cornerstones of high-yield portfolios and for good reason. Their generally stable and predictable cash flows, often protected by regulated prices, result in most utilities achieving high Dividend Safety Scores. Safe payouts can be a major asset for low risk investors - especially retirees who depend on dividends for funding their living expenses. However, not all utilities require one to sacrifice growth for a safe, high yield. One global utility in particular, Brookfield Infrastructure Partners (BIP), appears to have a long runway for income growth. Let’s take a closer look at Brookfield Infrastructure Partners for consideration in our Conservative Retirees dividend portfolio. Business Overview Brookfield Infrastructure Partners is one of [...]
Vector Group (VGR): How Safe is the Sky-High Dividend Yield?
Tobacco stocks such as Altria (MO) and Philip Morris International (PM) have long been favorites for dividend investors seeking generous, secure, and steadily growing yields. However, with massive consolidation in the tobacco industry, courtesy of the secular decline in world smoking rates, the number of quality tobacco blue chips continues to decline. Vector Group (VGR) is now the highest-yielding tobacco stock trading in U.S. markets with a 7.6% dividend yield, and the company has even raised its dividend for 19 consecutive years. Is the stock’s high yield a signal that this relatively tiny ($2.7 billion market cap) cigarette provider is a hidden gem that investors living off dividend income should consider owning? Or is the market [...]
Royal Dutch Shell (RDS.A): Is a Dividend Cut on the Horizon?
With interest rates still at historic lows and the stock market soaring, income investors are hard pressed to find good places to put new capital to work. As a result, high-yield stocks such as Royal Dutch Shell (RDS.A) often attract investors with the promise of mouthwatering yields. But while there are excellent high-yield stocks out there, a very high yield can also be an important red flag that a company’s fundamentals have deteriorated to the point that the payout may no longer be safe. Our Dividend Safety Scores can help separate the risky high yield stocks from the safer ones. Let’s take a closer look at this integrated oil company for our Conservative Retirees dividend portfolio to [...]