Almost everyone knows it’s essential to save for retirement, but, all too often, we start when it’s too late. If you’re looking for a comfortable retirement, the key is to start planning now, whether you're just starting your first job or mid-career.
A retirement portfolio is a collection of investments made to provide income and growth during retirement. They typically consist of stocks, bonds, and cash equivalents. And the goal is to create a diversified mix of assets that will provide stability and growth over time.
3 Stocks To Kickstart a Retirement Portfolio
Before buying dividend stocks for a retirement portfolio, it is essential to consider your age, investment goals, and risk tolerance. You will also need to decide how much money to allocate to each stock and rebalance the portfolio periodically to ensure that your investments are still aligned with your goals and risk tolerance.Â
If history repeats itself, the following 3 dividend stocks should add significant value to anyone’s retirement portfolio.
3M Company (MMM)
3M Company is a diversified technology company operating in over 70 countries. It was founded in 1902 and has been a dividend aristocrat since 1958. The company provides products to various markets, including health care, manufacturing, and consumer goods. Today, 3M spends over $2 billion annually on research and development, cementing its position as a global manufacturing leader.
The company has been essential during COVID-19, as it produced (and continues to produce) various products used in the healthcare industry, including face masks and hand sanitizer. That said, 3M suffered during the pandemic because businesses were shut down.Â
On May 10, 2022, 3M announced a quarterly dividend of $1.49 a share - representing a yield of 4.48% based on its last trading price of $133.95. Today, the dividend payout ratio is 58.71%, leaving the company plenty of room for future dividend growth. In fact, 3M has increased its dividend for 64 consecutive years. But, growing the dividend isn't the only way 3M rewards its shareholders. The company also has a history of buying back billions of dollars worth of its shares.
On July 26, 2022, 3M is expected to report its second-quarter earnings. Analysts expect EPS to come in at $2.43 per share.
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Verizon (VZ)Â
Verizon is one of the largest telecommunications companies in the United States. It was founded in 1983 as Bell Atlantic due to the AT&T breakup. In 2000, Bell Atlantic merged with GTE, and the company became Verizon. Verizon offers a wide range of services, including cellular phone, landline, broadband Internet, and cable TV. The company has more than 115 million customers in the U.S. Verizon is also known for its Fios service, a high-speed all fiber optic internet and television service.
In 2021, Verizon’s net income came in at $21 billion, up 23.95% from $17.8 billion in 2020. Analysts set a mean target price of $59.05 for the company’s stock price - representing a potential upside of 23.8% from yesterday's close.
Verizon has increased its dividend for each of the past 17 years. Not only that, but they also offer a compelling dividend to shareholders. Based on the last trading price, the stock currently yields 5.22% - over 3 times higher than the S&P 500’s 1.6% dividend yield. Finally, their dividend payout ratio is just 46.65% - leaving the company lots of ability to reinvest in its operations, and increase its dividend for many years to come.
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Johnson & Johnson (JNJ)
Last but not least, we have Johnson & Johnson - a multinational corporation with over 130 years of experience in the healthcare industry. The company manufactures various medical products, from bandages and baby powder to cancer treatments and surgical equipment. With a $468 billion market cap, J&J is also one of the world's largest healthcare service providers.
Analysts set a mean target of $189.54 for the stock, representing a potential 10.6% upside (dividends excluded) from its last trading price.
The company's current dividend yield of 2.65% may not be the most attractive in terms of dividends. However, long-term investors must consider that the company has increased its dividend for each of the past 59 years.Â
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Final Thoughts
When buying stocks for your retirement portfolio, it’s essential to consider that you’ll want to hold them for many years - and perhaps reinvest the dividends. As such, before making a final decision, consider the company’s dividend, payout ratio, and its ability to weather storms such as the coronavirus pandemic, and financial crises. No doubt, it’s something all three companies have in common.Â
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