Corporations have a couple of options for their annual earnings. One, they can reinvest those earnings in their revenue-earning operations, thus fueling their expansion. Two, they can hand out those earnings to their shareholders, thus resulting in what are called dividends. Different corporations can have very different policies on dividends, with some choosing to pay regular dividends while others choose to either never pay or almost never pay dividends so that they can focus on their growth. Regardless, when someone chooses to buy a stock for the purpose of collecting its dividends, that stock can be called a dividend stock.
Who Should Be Interested in Dividend Stocks?
Dividend stocks are neither better nor worse than their counterparts. This is because different people have different motives for investing, meaning that they want different things out of their investments. Generally speaking, people who want dividend stocks want investments that will pay them money on a regular basis while still retaining the upward potential of stocks, which is a very popular combination for excellent reasons. In particular, retirees who want a source of income in their retirement are often interested in dividend stocks because they can meet a number of their most important criteria for their investments.
Here are five examples of dividend stocks that retirees might want to look into:
AT&T is a popular choice because it has been paying a higher and higher dividend for more than 30 years. Unsurprisingly, this makes it an excellent choice for not just retirees but also a wide range of other investors. With that said, interested individuals should note that AT&T has turned into a true media conglomerate in recent times by buying DirecTV as well as merging with Time Warner. Its integration with its new components seems to be smooth, but there is no such thing as a 100 percent guarantee that this will always remain the case.
Perhaps unsurprisingly, energy is a very reliable industry. In Enbridge’s case, it is interesting because it has focused on transportation networks as well as storage facilities for oil and gas. Due to strategic positioning that has enabled it to benefit from the increasing production in North America, Enbridge has flourished in recent times.
Realty Income (O)
For those who are unfamiliar with the concept, REIT stands for real estate investment trust. Realty Income is a REIT that focuses on commercial properties that are rented out to a wide range of businesses in a wide range of sectors, thus making it more resilient versus economic shocks. However, what might be most interesting for retirees is the fact that Realty Income pays dividends on a monthly basis, which isn’t particularly common even for dividend stocks. This is possible because Realty Income has very stable cash flow, which have been built upon its long-term leases with a high percentage of companies with investment-grade ratings. This doesn’t mean that Realty Income is 100 percent immune from economic shocks, just that it is more insulated from them than all but a small number of its counterparts.
Tanger Factory Outlet Centers (SKT)
Tanger Factory Outlet Centers is a REIT that specializes in outlet centers, which lease space to big name retailers such as Coach, Michael Kors, and Ralph Lauren. Some people might be wondering whether Tanger Factory Outlet Centers will be able to continue faring well considering the pummeling that brick-and-mortar retailers have been receiving in recent times, but the REIT has more protection than most because of a combination of the best tenants, a superior shopping experience, and high discounts from the manufacturers that can’t be matched with ease by other retailers.
Speaking of REITs, there is another example in the form of Welltower, which specializes in healthcare properties. This is important because an aging population means that healthcare spending is expected to continue rising for the foreseeable future, which in turn, means that healthcare properties are expected to do well under such circumstances. Combined with the fact that Welltower is relatively conservative when it comes to its managerial policies as well as the fact that it is shielded to some extent from legislative risks, this makes it a very stable choice for people looking for a good dividend stock.