3 Ideal Retirement Stocks for High Income Seekers
These names have yields making them attractive for retirement income, and have long-term growth potential.
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With the average dividend yield of the S&P 500 at just 1.3% right now, investors in retirement may feel that there are few places to find safe income in the stock market. Retirees who live off investment income such as dividends might be tempted to reach for extreme high yields from riskier investments.
However, there are plenty of high dividend stocks that have strong current yields above 3%, and also have secure dividend payouts that can grow over time.
The following three dividend stocks have yields that make them attractive for retirement income, and have long-term growth potential.
A Biotech Bellwhether
Gilead Sciences GILD is a biotechnology company that operates with a clear focus on antiviral medication and treatments. Its main products include treatments for HIV, Hepatitis B, and Hepatitis C (HBV/HCV), but Gilead has also ventured into other areas such as oncology.
Gilead reported its third-quarter earnings results on November 6. The company generated revenues of $7.6 billion during the quarter, which was above the analyst consensus estimate.
The company’s top line was up by 7.1% compared to the previous year’s quarter. Gilead’s Covid therapy Veklury (remdesivir), generated higher revenues compared to the previous year’s quarter, seeing a 9% revenue gain on a year-over-year basis.
Backing that out, Gilead’s product sales were up by 7% year over year, which is very solid. HIV drug Biktarvy, Gilead’s biggest drug in terms of sales volumes, grew by a nice 13% compared to the previous year, while Gilead’s oncology portfolio generated revenue growth of 6%, which was a bit weaker compared to the previous quarter’s growth rate. Gilead generated earnings per share of $2.02 during the third quarter.
Gilead has updated its revenue guidance range for 2024, forecasting revenues of around $28.0 billion. Gilead’s HIV business continues to grow, and Gilead is very well-positioned in that market, which is why we believe that the company is poised for long-term growth.
In the HIV market, which continues to grow globally, Gilead continues to be the market leader, holding a large market share. It is unlikely that Gilead will lose its market position, and the major players have no interest in engaging in a price war.
GILD has increased its dividend for 10 consecutive years and currently yields 3.3%.
A Bulls-Eye for Income
Target Corp. TGT is a big-box retailer with about 1,850 big box stores, which offer general merchandise and food, as well as serving as distribution points for the company’s burgeoning e-commerce business. Target should produce more than $100 billion in total revenue this year. The company also sports an extremely impressive dividend increase streak of 56 years.
Target posted third-quarter earnings on November 20, and the stock was obliterated after what can only be described as awful guidance for the fourth quarter. Third-quarter revenue was $25.67 billion, up 1.1% year over year, but missing estimates by $230 million. Adjusted earnings per share came to $1.85, which missed estimates by a staggering 45 cents, or 20%.
For Q3, comparable sales were up just 0.3%, missing estimates of 1.5%. Guest traffic was up 2.4% in the quarter while digital comparable sales rose 10.8%. Growth was led by Target Circle 360 and Drive Up. Operating margin was 4.6% of revenue, down from 5.2% a year ago.
Gross margins were off 20 basis points to 27.2% of revenue, reflecting higher digital fulfillment and supply chain costs. That was due to higher inventory levels, higher digital sales volumes, and new supply chain facilities coming online. Inventory at the end of Q3 was $15.17 billion, up from less than $12 billion a year ago.
E-commerce is a future growth catalyst for Target. Its digital efforts are also working extremely nicely, although there was some pulling back after enormous sales growth during the pandemic.
Share buybacks are an additional catalyst for EPS growth. Shares worth $354 million were repurchased during the quarter, and $9.2 billion remained on the company’s authorization, worth about 16% of the current market cap.
TGT has increased its dividend for over 50 years and currently yields 3.3%.
Tune In for Quality Dividend Income
Comcast Corp. CMCSA is a media, entertainment and communications company. The company reports in two key business segments: Connectivity & Platforms (Residential Connectivity & Platforms and Business Services Connectivity), and Content & Experiences (Media, Studios, Theme Parks).
Comcast reported its Q3 2024 results on Oct. 31. For the quarter, the company’s revenue rose 6.5% to $32.1 billion year over year. Adjusted EBITDA (a cash flow proxy) was down 2.3% to $9.7 billion. However, it was able to increase adjusted EPS by 3.3% to $1.12. Comcast generated free cash flow (FCF) of $3.4 billion.
The Connectivity & Platforms segment’s revenues were down 0.4% to $20.3 billion. The segment experienced adjusted EBITDA growing marginally by 0.7% to $8.3 billion, helped by margins expansion of 0.5% to 40.9%.
The Content & Experiences segment saw revenue grow 19% to $12.6 billion, while its adjusted EBITDA fell 8.7% to $1.8 billion. Within this segment, Media saw a 36% jump in revenue to $8.2 billion. This revenue rose 5% to $6.3 billion, excluding impacts from the Olympics.
Studios saw a 12% jump in revenue to $2.8 billion and a 9% increase in adjusted EBITDA to $468 million, helped by the release of Despicable Me 4 which grossed nearly $1 billion in the worldwide box office.
Comcast generates substantial cash flow. From 2020 to 2022, it allocated almost 47% of its operating cash flow for capital spending in the long-term growth of the business, which left ample free cash flow to cover the dividend. Capital spending was 43% of operating cash flow in 2023. For example, Comcast is building a new theme park, Epic Universe, which is scheduled to open in May 2025 in Orlando, Florida.
Share buybacks will also boost EPS growth moving forward. During Q3 2024, Comcast repurchased $2 billion worth of common stock at ~$40.08 per share.
Comcast has had 16 consecutive years of dividend increases through two recessions. Its 15-year compounded dividend growth rate was 18%. This fast dividend growth was made possible through solid earnings growth and the firm’s safe dividend payout ratio. Its dividend is well-covered by earnings and cash flows.
CMCSA shares currently yield 3.3%.
At the time of publication, Ciura had no positions in any stocks mentioned.