RAbout 64 million Americans who receive Social Security benefits will see their payouts increase by 5.9% this year as they adjust to the rising cost of living. If you’ve been paying attention to inflation news, you might be disturbed to know that the power increase is well below this year’s inflation rate.
In addition to the possibility that subsequent cost-of-living adjustments (COLAs) may not keep pace with changes in the dollar’s purchasing power, the Social Security Administration also acknowledges that the program’s trust fund reserves will be depleted in about 15 years when Congress allows it doesn’t do action. Even assuming the Social Security program is fixed and COLAs keep up with inflation, owning a portfolio of income-generating investments could help you shore up your retirement. And with the stock market seeing big selloffs this year, long-term investors have an opportunity to invest in top-paying stocks at reasonable prices.
Read on to see why a panel of Motley Fool contributors think buying these income-generating stocks would be a smart move.
Bank-proof income with this new Dividend King
Keith Noonan (PepsiCo): With its strong core business and return-income profile PepsiCo (NASDAQ:PEP) Stock has long been a favorite among dividend investors. The company has a fantastic collection of billion-dollar snack and beverage brands, and its scale and distribution advantages should allow the company to perform solidly regardless of macroeconomic cycles and industry shifts.
While demand for soda has declined in recent years, PepsiCo has successfully diversified its demand beverage products and branching into new categories, and the company’s recently released second quarter results were very encouraging. Despite the challenging macroeconomic environment, second-quarter revenue rose more than 5% year over year. Meanwhile, excluding its recent acquisitions, revenue rose 13% compared to the year-ago period.
The consumer goods giant has now increased its annual payout for 50 straight years, joining the illustrious ranks of the dividend kings, and it looks like Pepsi is in good shape to continue delivering dividend growth. This is a relatively low-risk stock with a great dividend profile that is proving to be a worthwhile addition for investors looking for companies suitable for a retirement-oriented portfolio. The stock’s yield is currently a solid 2.7%, and it’s backed by a well-managed company that makes stocks a trustworthy investment.
In connection with a decrease of about 15% for the S&P500 During this year’s trading, PepsiCo’s dividend-adjusted decline of less than 2% speaks to the stock’s defensive strength, and it continues to stand out as a top stock for retirement portfolios.
Pull that overseas lever
James Brumley (Unilever): I know it’s a bit off the beaten path but I like it unilever (NYSE:UL) not only as a dividend payer you can count on, but also as a stock that has held up relatively well even in a bearish environment.
Yes, Procter & Gamble (NYSE:PG) is the typical go-to name in the consumer goods Place. It has a great pedigree, and perhaps more importantly for most U.S. investors, it’s a native name that people are more familiar with. While Unilever brands such as Ben & Jerry’s, Vaseline and Hellman’s can be found in the United States, a significant portion of the company’s business is conducted overseas. This is ultimately a good thing for anyone looking to dodge market-wide troubles. It seems that bear markets and recessions tend to be a bit more intense in the US than elsewhere.
At the same time, investing in foreign companies can mitigate some of the currency volatility that many investors experience when most of their stocks are denominated in US dollars.
Other perks of owning Unilever include the company’s dividend history and current yield. While not a Dividend Aristocrat, Unilever hasn’t failed to pay a quarterly dividend since 2009, or a semi-annual dividend since 1999. And those payouts have been growing steadily all this time, with the current quarterly payout rate being more than 80% higher than it was a decade ago.
Given that history, I’m surprised you can still enter a 4.1% yield. But I won’t complain.
The arteries of the US energy sector
Daniel Folber (Child Morgan): Dividend investors know that a 3% yield backed by a reliable company is the sweet spot for passive income. However, there are some companies that offer even higher returns without sacrificing reliability.
one Top stock is energy infrastructure giant Children Morgan (NYSE:KMI). Kinder Morgan operates one of the largest networks for the transportation and storage of natural gas, oil and carbon dioxide. Kinder Morgan is a midstream company that transports fuels for its customers and does not produce or refine hydrocarbons. This business model leaves less room for growth, but generates reliable cash flows thanks to long-term fixed-price or take-or-pay contracts. This makes midstream companies far less cyclical than producers or refiners based on oil and gas prices. The momentum was evident during the oil and gas crash of 2020, when midstream companies fared far better than upstream or downstream companies, or even the integrated majors Exxon Mobile or rafters.
Kinder Morgan’s strong cash flow supports its dividend, which yields 6.4% as of this writing. Investors shouldn’t expect Kinder Morgan to be a high-growth name, or even to outperform the broader stock market. Rather, the ideal Kinder Morgan investor is someone looking for income and capital preservation. given the importance of natural gas in the US economy and the growing demand for international exports, Kinder Morgan stands out as one of the best passive income machines available to buy right now.
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Daniel Folber has no position in any of the stocks mentioned. James Brumley has no position in any of the stocks mentioned. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool recommends Unilever. The Motley Fool has one confidentiality policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.