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By David Jagielski, The Motley Fool
If you're a retiree, it's a good time to think about transitioning from growth stocks into safer dividend investments. Not only can they provide you with more stability, but the dividend income they generate can be crucial to help pay bills and provide you with more money to make your retirement years much more enjoyable.
Three high-yielding stocks that are great options for retirees today are Coca-Cola (NYSE: KO), Realty Income (NYSE: O), and Enbridge (NYSE: ENB).
Coca-Cola
Coca-Cola has a strong brand that consumers around the world have been familiar with for many years. Amid inflation, it has been able to pass along rising costs to consumers without a big drop in demand.
Last year, the company's net revenue rose by 6% to $45.8 billion. And its operating margin of 24.7% was only slightly lower than the 25.4% it achieved in the previous year. For 2024, the business still looks poised for more growth, with Coca-Cola anticipating that its revenue will grow organically by 6% to 7%. Meanwhile, its per-share earnings will rise by at least 8% when excluding the impact of foreign currency.
The company's strength and versatility has been on full display over the past few years as Coca-Cola has weathered the effects of some challenging economic conditions and still delivered strong results. Earlier this year, Coca-Cola also announced it was raising its dividend for a 62nd consecutive year. The Dividend King makes for an ideal option for retirees who want a solid income investment. At 3.2%, Coca-Cola's current yield is more than double the S&P 500 average of 1.4%.
Realty Income
Another good dividend stock for retirees is Realty Income. The real estate investment trust (REIT) has some excellent diversification, which can provide retirees with good long-term stability. While it has a broad exposure to many industries, grocery stores account for 11% of its annualized contractual rent, followed by convenience stores at 10%. Dollar stores, home improvement stores, drug stores, and restaurants are other key industries in Realty Income's portfolio.
REITs haven't been popular buys in recent years due to rising interest rates; income investors have been looking at other income-generating assets instead. But interest rates are likely to come down in the future, it's just a matter of when. And once that happens, Realty Income could become a hot buy again.
Last year, the REIT's funds from operations, or FFO, was $4.07 per share, which was up slightly from the $4.04 it reported a year earlier. Despite challenging economic conditions, Realty Income has demonstrated excellent resiliency. FFO is a key metric REITs use to assess their performance and profitability and to determine whether their dividend is safe. In Realty Income's case, investors don't have much to worry about these days.
Realty Income's 5.8% can provide retirees with a solid source of recurring income. And with the stock down 15% over the past year, investors can buy in at a discount. The REIT has also increased its monthly dividend a whopping 124 times since 1994.
Enbridge
The highest yield on this list comes from Canada-based pipeline company Enbridge. Its 7.7% yield means you would need to invest just $13,000 into the oil and gas stock to collect an annual dividend of $1,000. By comparison, you would need to invest more than $71,000 to get the same payout if you bought shares of the average S&P 500 stock.
Enbridge's high yield isn't cause for concern as the business is in fine shape. The company relies on long-term contracts, which provide it with some great stability. Enbridge boasts that it has met its financial guidance for 18 straight years. In 2023, its adjusted earnings of 5.7 billion Canadian dollars were unchanged from the previous year.
The company has been pursuing acquisitions to strengthen its financials and pad its top and bottom lines in the future. And in doing so, it has rewarded investors; the company has increased its dividend for 29 consecutive years. At a multiple of 17 times earnings, Enbridge makes for an excellent value buy right now.
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