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All Contents © 2020The Kiplinger Washington Editors
By Aaron Levitt
| April 14, 2017
Income. It’s what retirement is made of. Increasingly — thanks to stubbornly low interest rates — that income has been derived from a hefty dose of dividend stocks, and there are plenty of reasons why you should love dividends.
What’s not to love, however, is the waiting to cash those dividend checks.
Most dividend stocks will hand out their payouts every three months. Typically, in March, June, September and December, during the quarter ends. The issue for retirees is they can often go without for months as they wait for their dividends to hit their bank accounts.
Essentially, their income streams dry up during the months in between. For those investors in retirement who need a stream of income to meet their obligations, this could be a serious problem.
But luckily, there are plenty of dividend stocks to buy that offer income in the other months, allowing retirees a full 12 months of dividend payouts.
With that in mind, here are three stocks to buy for 12 months of income.
Prices and data are from the original InvestorPlace story published on April 11, 2017. Click on ticker-symbol links in each slide for current prices and more.
Dividends: January, April, July and October
Look around any hospital room, and you’ll only see a few names on the various pieces of equipment. And odds are most of those names will be owned by Medtronic plc.
MDT got its start designing the first artificial pacemaker back in the 1950s. Since then, the firm has become the largest medical device company in the world. That includes plenty of high-tech items like artificial heart valves, insulin pumps and cardiac stents.
Aside from these high-tech, higher margin items, Medtronic is a juggernaut when it comes to “lesser” medical devices. Thanks to its buyout of rival Coviden a few years ago, MDT added everyday hospital items like urology products, IV tubing, traditional wound care items and syringes to its product mix. The beauty here is that these sorts of items are used every day by hospitals and are often used just once before being discarded.
That provides a steady and recurring stream of revenues into Medtronic’s bottom line. It also fuels its big-time dividend. While the yield isn’t super high at only 2.15%, it has managed to grow that payout steadily over the last 39 years straight. Now, there are some rumors that MDT is looking to shed some of the lowest margin items from this division. But given rising demand for healthcare, it should keep the streak going far into the future.
Dividends: February, May, August and November
A lot has been written about Apple Inc. and its accession into tech stardom. But after all the ink has been spilled, AAPL remains one heck of a dividend stock.
The firm’s combination of hardware, software and services mints cash as users get plugged into its ecosystem. That, in turn, drives sales and cash flows down the road. The real win is that Apple is really just getting started in places like China and other emerging markets. Its near-luxury status has made it the hot item across the globe.
And while some have questioned Apple’s ability to keep innovating, patient investors have plenty of time for the firm to strike gold again. Unlike former consumer tech stars that have fizzled, AAPL has more than $246 billion in cash and securities on its balance sheet.
That amount of money gives AAPL enormous freedom to work on projects and get them right. It also helps drive dividend growth. It’s no secret that Apple has become tech’s biggest dividend star, increasing its payout by 55% in just a few short years.
With its continued massive cash balance, hefty cash flows and history of innovation, Apple should be able to keep the dividends going. Making it one of the best stocks to buy for income.
Dividends: March, June, September and December
The halcyon days for the refiners may be over, but Valero Energy Corporation should be able to keep its cash flows going. As the largest independent refiner in the U.S., VLO has the size and scope that allows it to squeeze the most out of its 15 refineries.
That’s because the bulk of those are located along the Gulf Coast. This allows VLO to have easy access to a variety of imported and domestic crude oil and natural gas. Valero’s refineries have the ability to switch up the kind of crude to benefit from lower costs. The other ace up its sleeve is that much of the pipelines and crude-by-rail infrastructure supplying these refineries is now tucked inside Valero Energy Partners LP (VLP). That allows VLO to profit from its interests and the cash flows as well as save on taxes.
All of this has helped VLO continue to reap big profits. While its last full year of reported earnings was last than the previous — because oil prices were sooooo low in 2015 — Valero still managed to make $4.6 billion in profits. More importantly, its cash flows remained robust, and VLO was able to raise its dividend once again.
With a current yield of 4.25%, VLO could be one of the better higher-yielding income stocks to buy.
This article is from Aaron Levitt of InvestorPlace. As of this writing, he was long MDT.