The 6 Best Dividend Stocks to Buy for Retirement

Dividend Stocks

These are the six best dividend stocks for retirement purposes. They have consistent and high yields and their dividends are well-covered by earnings.

Moreover, more often than not, these stocks have higher yields than their average dividend yield over the past several years. That makes them more valuable.

For example, if the stock rises from here, its yields will fall toward the average historical yield. So their high yields act are tethered to their historical average.

The average price-to-earnings (P/E) multiple of this group is 7.8x earnings. Moreover, their average dividend yield is 6.70%.

Let’s dive in and look at these now.

Ticker Company Recent Price
OCSL Oaktree Specialty Lending Corp $6.81
NRG NRG Energy $36.10
LYB LyondellBasell Industries $87.62
F Ford $12.78
PSEC Prospect Capital $7.41
BDN Brandywine Realty Trust $9.12

Oaktree Specialty Lending Corp (OCSC)

Oaktree Specialty Lending Corp (NASDAQ:OCSL) is a business development company that lends out money to middle-market companies. It focuses on deal lending, such as bridge financing and mezzanine debt.

This lucrative type of lending helps fund expansions, acquisitions and/or management-led buyouts. Oaktree is a large private equity firm that feeds these clients to OCSL as a sort of captive lender.

As a result, OSCL has solid and consistent earnings. It pays a generous dividend of 66 cents annually. That puts its dividend yield at 9.69%.

This is well covered by the forecast 2022 earnings of 71 cents per share for this year. Moreover, the stock trades for just 9.5x 2022 forecast earnings, according to Seeking Alpha.

Moreover, the average yield for the last four years has been 7.70%. This is higher than today’s 9.69% rate.

If OCSL were to have a 7.70% dividend yield now, its price would be higher at $8.57 per share. That implies that the stock could rise 25.9% over today’s price.

These factors make it one of the best dividend stocks for retirement.

NRG Energy (NRG)

NRG Energy Corp (NYSE:NRG) is an integrated, Houston-based electric power generator. Analysts expect earnings will grow 17% in 2022 to $3.86 in 2022 and 30% in 2023 to $ $5.01 per share. That puts the stock, at $36.36 as of July 26, at just 9.4x 2022 earnings and 7.4x 2023 earnings-per-share forecasts. This is very cheap for an electric utility.

Moreover, it has an attractive dividend yield of 3.85%, given its dividend of $1.40 per share. This also means its dividends are just 36% of 2022 earnings forecasts. It has raised its dividend each year for the past three years.

In addition, NRG produces a huge amount of FCF. For example, in Q1 it made over $1.67 billion in cash flow from operations. It used just $85 million of that for dividends and spent $188 million on buybacks. That works out to $752 million on a run rate basis.

This means that buybacks represent 8.8% of its $8.53 billion market value. So, with its 3.85% dividend yield, NRG delivers a total yield of 12.65% to its shareholders. That makes it one of the best dividend stocks for retirement.

LyondellBasell Industries (LYB)

LyondellBasell Industries NV (NYSE:LYB) is a Houston-based global chemicals and plastics manufacturer. The stock is now very cheap, as we are in the middle of a recession and this is a cyclical stock.

Interestingly, though, LYB stock is down by just 5% year-to-date. But it’s still cheap. At $87.18 on July 26, the stock trades for only 5.4x analysts’ forecasts of $16.50 per share in earnings for this year.

Moreover, its 2023 multiple is only slightly higher at 5.5x earnings. Meanwhile, it pays a $4.76 per share dividend, giving the stock a 5.46% dividend yield.

That dividend is higher than its four-year historical average of 5.11%. That implies the stock could still rise 6.8% to $93.15.

Ford (F)

Ford (NYSE:F) is slowly transforming itself into an all-electric car manufacturer. It plans on on splitting off its electric car holdings into a separate company.

F stock is down over 41% YTD and is now very cheap. The price-to-earnings multiple for 2022 is 6.5x, based on analyst estimates taken by Seeking Alpha.

Its 2023 forward P/E multiple is just 6.2x. This is based on earnings growth forecasts of 5.7% for 2023.

Ford now pays a quarterly dividend of 10 cents or 40 cents annually. So, at $12.54 on July 26, the stock has a 3.19% dividend yield. In the last 12 months, the stock has had an average yield of 2.34%. If Ford stock trades at that yield now it could rise 36% to $17.09 per share.

Moreover, Ford can clearly afford the dividend. It is just 20.8% of analysts’ 2022 forecast of $1.92 EPS, and 19.7% of 2023 $2.03 forecasts.

Prospect Capital (PSEC)

Prospect Capital Corp (NASDAQ:PSEC) is a business development company that invests in the debt securities of middle market companies (sized between $10 million and $500 million in revenue). Much of this debt is used to help the companies make acquisitions, expand operations and do leveraged buyouts.

Right now the BDC pays a monthly dividend of 6 cents per share. That works out to 72 cents annually, and at $7.39 per share, the stock yields 9.74%.

This is slightly higher than the 9.61% yield the stock has traded at over the last 12 months. That implies it could rise by 1.4%. But that is not the main reason to own the stock. The main reason is its monthly dividend.

This dividend is reasonably secure. For example, analysts project the company will make 80 cents for the year ending June 30. And for next year ending June 30, 2023, they project 81 cents. That more than covers the 72 cents annual dividend paid monthly.

Including this stock in the list raises the average dividend yield of the group. It makes it one of the best dividend stocks for retirement.

Brandywine Realty Trust (BDN)

Brandywine Realty Trust (NYSE:BDN) is a major real estate investment trust with a $1.62 billion market cap focused on buying properties in the Philadelphia, Austin and Washington, D.C. markets. It has done this for 25 years and is very profitable.

It now has an 8.29% dividend yield, which is attractive to dividend investors. This is higher than its historical 5.83% average for the last four years. With the same yield today, the stock would trade at $13.04 per share, over 42% higher.

Moreover, analysts forecast its funds from operations, a commonly used cash measure in the REIT industry, will grow 1.4% to $1.41 per share. That puts it on a cheap P/FFO multiple of just 6.5x for next year.

As a result, this is one of the best dividend stocks for retirement.

On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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