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5 Dividend Stocks to Hold Into Retirement

By on November 25, 2012     

When building a retirement investment portfolio, low volatility stocks (stocks that do not post strong reactions to changes in the wider market) are generally preferred as they tend to provide reliable rates of return over longer term time horizons.  Since these types of stocks also tend to offer high dividend payouts and see smaller declines during bear markets, they tend to be some of the most attractive choices for investors planning for retirement.

In terms of historical performance, some additional factors should be considered.  In the last 50 years, low volatility stocks have tended to match the wider performance of the market but with much lower levels of risk exposure.  These trends are matched in most global stock markets as well but it should be remembered that during bull markets, low volatility stocks tend to under-perform, and this can be seen this year as well, with the current rally in the S&P 500.  But for those planning for retirement (or already retired) risk reduction should be a primary focus and here we will look at some stock choices to buy and hold for the long term (multiple market cycles).

Progress Energy (PGN) has a market valuation of $16 billion, making it one of the larger utility companies in theUS.  Merger plans with Duke Energy will likely increase the valuation and after approval the companies look to close by the middle of this year.  Currently, the stock price in PGN is down 5 percent on the year, making it attractive at current levels given that the stock’s three year average shows annual returns of more than 17 percent and a 10 year return of more than 5 percent.  All of this is combined with a dividend yield of 4.7 percent.  Analyst ratings call the stock a long term “hold” as PGN is poised to benefit from growth opportunities in regulated utility projects.

Kraft Foods (KFT) is one of the largest and most well-known brands in the world, with a $67 billion market value.  Kraft Foods is the largest packaged foods company inNorth America and the second largest globally.  With we-established brand names (such as Maxwell House, Nabisco, Oscar Mayer, and Chips Ahoy).  Stock prices have posted gains of 3 percent this year, and a three year return of more than 20 percent.  But even at these elevated levels, the dividend yield of 3 percent and its ten year returns of 2.5 percent help support the analyst “buy” and “hold” ratings that are currently seen.

Consolidated Edison (ED) has a market value of $17 billion, with two regulated utilities under ownership (Orange andRockland, and Con Ed of New York).  Company products include Natural Gas and Electricity toNew York,New Jersey, andPennsylvania.  The stock price has seen a drop of nearly 6 percent so far in 2012 but this makes it an attractive buy at cheap levels, given that its 10 year annual return rate is above 7 percent.  Dividend yields are also attractive, at nearly 4.2 percent, with most analysts calling the stock a “hold.”

Kellog’s (K), valued by the market at $18 billion is another well-recognized brand name, producing cereal, crackers and cookies within the brand.  Corn Flakes, Rice Krispies, Eggo, Pop Tarts and Keebler are some of the better known names under its ownership.  International sales make up more than a third of the company’s revenue as its products are sold in over 180 countries.  The stock is up so far this year, matching its consistent annual returns, seen over a 10 year period at roughly 6.5 percent.  Dividend yields are seen at 3.3 percent, with analyst ratings mixed with “buy” and “hold” ratings.

Procter and Gamble (PG), the largest manufacturer of consumer products has a market valuation of $177 billion.  The company’s wide product line includes Tide, Charmin, Pantene, Cover Girl, and Gillette.  So far this year, the stock price is seeing declines of nearly 3 percent but the 10 year returns show a very stable rise of 6.6 percent each year.  The PG dividend is currently seen at 3.3 percent with analyst ratings spilt between “buys” and “holds.”  Current forecasts for earnings are also strong with earnings per share expected to see gains of 9 percent into next year.


About the author

Richard Cox

Richard Cox is the author of Core Concepts in Technical Chart Analysis and has published a daily fundamental and technical analysis of the major asset markets (stocks, commodities, forex) for a variety of news outlets. He has a Bachelor’s Degree in History and a Master’s Degree in Finance and currently lectures in International Trade for university students in Nanjing, China.

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