In this article, we will discuss some of the best dividend stocks for an early retirement portfolio.
As retirement approaches, ensuring financial stability becomes increasingly important for investors. Among the available investment options, consistent dividend payments are especially attractive due to their dependability and security. Dividends, which represent a portion of a company’s earnings paid out to shareholders, provide a reliable income stream.
Dividend stocks are well-suited for retirees because they also offer protection during challenging times. A report by Morningstar highlighted that dividend-stock funds were well-prepared to endure the tech stock crash from 2000 to 2002, as they had minimal exposure to the sector. During that period, the Vanguard Total Stock Market Index suffered a cumulative loss of nearly 44%, largely due to significant declines in its growth stocks, whereas dividend stock funds experienced only about a third of that loss.
Also read: 10 Best January Dividend Stocks To Buy
Due to their solid long-term performance in the past, dividend stocks are becoming a vital part of a well-rounded retirement portfolio for many investors. Strategically chosen dividend-paying stocks can offer stability during market declines and enhance gains during upswings by providing regular income that helps mitigate losses and amplify returns. In addition, they offer a hedge against inflation, which has become a growing concern due to rising costs of essentials like food and energy. Several top-performing companies have consistently increased their dividend payouts over decades. David Giroux, a portfolio manager at T. Rowe Price who oversees the firm’s capital appreciation strategy, shared insights on dividend stocks in an interview with Barron’s. Below are some of his remarks:
“To have a retirement portfolio that has a significant component of stocks with attractive dividends makes a tremendous amount of sense. If the average company in the market can grow its earnings at 7% to 8% a year, your dividends should be growing at a similar rate.”
Analysts point out that while income and growth are crucial for retirees to maintain financial stability during a potentially long retirement, this approach has its limitations and may not be suitable for everyone. They advise building a portfolio that is diversified across various sectors and includes companies with strong cash reserves to support stock buybacks. Dave King, a senior portfolio manager at Columbia Threadneedle Investments, stressed the importance of straightforward diversification in an interview with Barron’s. He recommended holding at least eight stocks from different sectors, suggesting that while diversification doesn’t need to be overly extensive, it should include more than just a few stocks—ideally more than five, with representation from each major sector. King also advised that when selecting stocks, investors should not rely too heavily on Wall Street research. Instead, they should prioritize fundamental, time-tested factors like a company’s credit rating or the reputation of its management, which can provide key insights into the stability of its dividend payments.
A report by Franklin Templeton highlighted that over the past decade, dividends for the broader market index have steadily risen, with an average annual increase of just over 7%. In strong market periods, dividends have enhanced total returns, while in tougher years like 2020 and 2022, when returns were flat or negative, dividends provided stability and helped strengthen portfolio resilience.
Our Methodology:
For this list, we used a screener to select dividend stocks that have shown at least 10 years of dividend growth and are spread across various industries, making them suitable for a retirement stock portfolio. From the initial selection, we chose ten stocks, each from a different industry, all with yields of at least 2%. The stocks are ranked in ascending order of their dividend yields, as of January 6. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
10. Atmos Energy Corporation (NYSE:ATO)
Dividend Yield as of January 6: 2.52%
Atmos Energy Corporation (NYSE:ATO) is a Texas-based natural gas distribution company that focuses on providing safe and reliable natural gas services and invests heavily in infrastructure upgrades and safety programs. In fiscal 2024, the company celebrated its 13th consecutive year of successfully implementing its strategy centered on safe and reliable operations while upgrading its natural gas distribution, transmission, and storage infrastructure. This approach continues to deliver advantages for both customers and the wider community. The stock is up by over 15% in the past 12 months.
In the fourth quarter of 2024, Atmos Energy Corporation (NYSE:ATO) reported a net income of $134 million, up from $119 million in the same period last year. Its operating income came in at $185 million, growing from $154.1 million in the prior-year period. The company maintains a solid financial foundation, with 61% of its capital structure comprised of equity and access to $4.8 billion in available liquidity.
Atmos Energy Corporation (NYSE:ATO) currently offers a quarterly dividend of $0.87 per share, having raised it by 8.1% in November 2024. This marked the company’s 40th consecutive year of dividend growth, which makes it one of the best dividend stocks for an early retirement portfolio. As of January 6, the stock has a dividend yield of 2.52%.
At the end of Q3 2024, 20 hedge funds tracked by Insider Monkey reported having stakes in Atmos Energy Corporation (NYSE:ATO), up from 18 in the previous quarter. These stakes are collectively valued at more than $300 million. Among these hedge funds, Adage Capital Management was the company’s leading stakeholder in Q3.
9. Texas Instruments Incorporated (NASDAQ:TXN)
Dividend Yield as of January 6: 2.82%
Texas Instruments Incorporated (NASDAQ:TXN) is an American multinational semiconductor company that specializes in analog and embedded chips. The semiconductors serve as crucial components in electronic systems. With a portfolio exceeding 80,000 products, the company offers the most extensive range of general-purpose analog products, alongside a complete array of analog and embedded solutions, enabling customers to develop unique and innovative applications. In the past 12 months, the stock has surged by over 14%.
In the third quarter of 2024, Texas Instruments Incorporated (NASDAQ:TXN) reported revenue surpassing $4.1 billion, a decline from $4.5 billion in the same quarter of the previous year. The operating profit stood at over $1.55 billion, with a net income of $1.36 billion. Its financial stability was evident, with a trailing 12-month operating cash flow of $6.2 billion, highlighting the company’s robust business model, premium product range, and advantages from 300mm production. During this period, free cash flow reached $1.5 billion. Over the past year, Texas Instruments invested $3.7 billion in R&D and SG&A, allocated $4.8 billion to capital expenditures, and returned $5.2 billion to shareholders.
Texas Instruments Incorporated (NASDAQ:TXN) is one of the best dividend stocks for an early retirement portfolio as the company has been rewarding shareholders with growing dividends for the past 21 consecutive years. Currently, it pays a quarterly dividend of $1.36 per share and has a dividend yield of 2.82%, as of January 6.
The number of hedge funds tracked by Insider Monkey owning stakes in Texas Instruments Incorporated (NASDAQ:TXN) jumped to 57 in Q3 2024, from 50 in the preceding quarter. These stakes are collectively worth nearly $3 billion.
8. Old Republic International Corporation (NYSE:ORI)
Dividend Yield as of January 6: 3.06%
Old Republic International Corporation (NYSE:ORI) is an American property insurance and title insurance company. The company focuses on providing insurance policies designed for businesses, governments, and various institutions. Its primary revenue comes from these policies, mainly issued within the US, offering liability coverage across industries such as trucking, aviation, construction, healthcare, and energy. In addition, the company plays a key role in title insurance, protecting lenders or buyers in property transactions from issues like unpaid tax liens or other property-related claims. With a 12-month return of over 15%, ORI is one of the best dividend stocks for an early retirement portfolio.
In Q3 2024, Old Republic International Corporation (NYSE:ORI) reported a total operating revenue of $2.1 billion, marking a 10% increase from the previous year. The company saw a 9.6% rise in consolidated net premiums and fees, driven by strong performance in General Insurance and consistent growth in Title Insurance. Moreover, net investment income grew by 17.3%, benefiting from higher investment returns.
Old Republic International Corporation (NYSE:ORI) has demonstrated its dedication to shareholders by distributing $232 million through dividends and share buybacks. The company’s strong cash reserves have allowed it to issue special dividends several times, with the latest being a $2.00 per share dividend announced on December 13. Currently, it offers a quarterly dividend of $0.265 per share, yielding 3.06% as of January 6. With a 44-year track record of continuous dividend growth, this stock is an attractive option for retirees seeking reliable income.
Old Republic International Corporation (NYSE:ORI) was included in 31 hedge fund portfolios at the end of Q3 2024, up from 25 in the previous quarter, according to Insider Monkey’s database. The stakes owned by these hedge funds have a consolidated value of over $362.2 million. With nearly 3 million shares, Arrowstreet Capital was the company’s leading stakeholder in Q3.
7. The Coca-Cola Company (NYSE:KO)
Dividend Yield as of January 6: 3.17%
An American multinational beverage company, The Coca-Cola Company (NYSE:KO) ranks seventh on our list of the best dividend stocks for an early retirement portfolio. As a global entity, the company faces challenges across various regions rather than being confined to a single area. Despite this, it has consistently navigated regional events without missing a year of dividend increases, thereby enhancing shareholder value. This demonstrates remarkable resilience and dedication. In addition to its reputation for delivering a reliable product, the company has developed exceptional marketing strategies that ensure its brand remains prominent and at the forefront of consumers’ minds.
In the third quarter of 2024, The Coca-Cola Company (NYSE:KO) posted nearly $12 billion in revenue, exceeding analysts’ projections by $290 million. The company demonstrated strong cash flow, with $2.9 billion in operating cash flow and $1.6 billion in free cash flow. In addition, Coca-Cola achieved a notable adjusted operating margin of 30.7%, underscoring its solid profitability.
This consistent performance has resulted in significant long-term gains for shareholders, with The Coca-Cola Company (NYSE:KO) increasing its dividend for an impressive 62 consecutive years. Such an exceptional record of rewarding investors is uncommon among companies. Currently, the company pays a quarterly dividend of $0.485 per share for a dividend yield of 3.17%, as of January 6.
Warren Buffett’s Berkshire Hathaway was the largest stakeholder of The Coca-Cola Company (NYSE:KO) at the end of Q3 2024 with 400 million shares. Overall, 69 hedge funds held investments in the company in Q3, worth nearly $35 billion in total.
6. Eastman Chemical Company (NYSE:EMN)
Dividend Yield as of January 6: 3.73%
Eastman Chemical Company (NYSE:EMN) is a Tennessee-based company that is mainly involved in the chemical industry. The company has emerged as a leading player in the chemical industry, particularly following recent changes in export controls that have created favorable conditions for compliant suppliers. The new restrictions on exports to Russia and Belarus have restricted competitors’ ability to fulfill demand, particularly in the agriculture and medical sectors, allowing Eastman to capture more market share in these key areas. The company’s strong focus on legitimate civilian applications and its dedication to regulatory compliance provide the company with a distinct competitive advantage as demand grows for compliant chemical precursors.
Eastman Chemical Company (NYSE:EMN) generated over $2.4 billion in revenues in the third quarter of 2024, up 8.7% from the same period last year. The underlying trends in end markets have remained largely consistent with those observed in the second quarter, aligning with the company’s expectations. In several of its specialty product lines, the company continues to outperform the broader end-market growth, particularly in the automotive sector. During the quarter, its adjusted EBIT margin rose by 360 basis points compared to the previous year, driven by growth in volume and product mix, operating leverage, and enhanced commercial strategies.
Eastman Chemical Company (NYSE:EMN) remained committed to its shareholder obligation, returning $195 million to investors through dividends and share repurchases during the most recent quarter. Its operating cash flow came in at $396 million. On December 5, the company declared a 3% increase in its quarterly dividend to $0.83 per share. This marked the company’s 15th consecutive year of dividend growth, which makes EMN one of the best dividend stocks for an early retirement portfolio. The stock offers a dividend yield of 3.73%, as of January 6.
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 26 funds held stakes in Eastman Chemical Company (NYSE:EMN), compared with 28 in the previous quarter. The total value of these stakes is over $273.5 million. Ken Griffin’s Citadel Investment Group was the company’s leading stakeholder in Q3.
5. Kimberly-Clark Corporation (NYSE:KMB)
Dividend Yield as of January 6: 3.83%
Kimberly-Clark Corporation (NYSE:KMB) is an American multinational consumer goods and personal care company. In the third quarter of 2024, the company posted revenue of $4.95 billion, reflecting a 4% year-over-year decline. The company is actively implementing its “Powering Care” strategy to foster innovation, reduce costs, and provide better solutions across different price points. Its efforts to streamline operations are designed to increase agility and responsiveness in the market. Despite the revenue decrease, the company is positioned to achieve strong growth in operating profit, margins, and earnings per share for 2024, with a focus on maintaining this momentum into 2025. In the past 12 months, the stock has shown a modest return of a little over 2.3%.
In 2024, Kimberly-Clark Corporation (NYSE:KMB) showcased strong cash generation. In the first nine months of the year, the company reported $2.4 billion in operating cash flow, an increase from $2.3 billion in the same period the previous year. Additionally, it returned $2 billion to shareholders through dividends and share buybacks.
Due to this strong balance sheet, Kimberly-Clark Corporation (NYSE:KMB) was able to grow its dividends consistently for 52 consecutive years. The company offers a quarterly dividend of $1.22 per share and has a dividend yield of 3.83%, as of January 6.
Insider Monkey’s database of Q3 2024 indicated that 45 hedge funds held stakes in Kimberly-Clark Corporation (NYSE:KMB), up from 43 in the previous quarter. These stakes have a collective value of more than $1 billion.
4. The J. M. Smucker Company (NYSE:SJM)
Dividend Yield as of January 6: 3.90%
The J. M. Smucker Company (NYSE:SJM) ranks fourth on our list of the best dividend stocks for an early retirement portfolio. The American food company manufactures a wide range of food and beverage products. In fiscal Q2 2025, the company posted revenue of $2.27 billion, reflecting a 17% increase compared to the same period last year. The revenue surpassed analysts’ expectations by more than $6.2 million. The company’s gross profit reached over $886 million, marking a 22% year-over-year growth.
Middle Coast Investing highlighted strengths in the company’s business in its Q2 2024 investor letter. Here is what the firm said:
“The J. M. Smucker Company (NYSE:SJM), like Lululemon, is an S&P 500 component and one of the worst 70 or so stocks in the S&P 500 this year. The maker of Jif, Smuckers jams, Uncrustables, Folgers Coffee, and Dunkin Coffee pods has had a bad 10 months since announcing its purchase of Hostess Brands (Twinkies, Hostess Cupcakes, etc.). Hostess was expensive and exposes J.M. Smucker to the risk that the new weight-loss drugs suppress diehard consumers’ appetite for sweets.
I think J.M. Smucker shares have suffered enough, and are at a point where a buy should work. The company is producing ample free cash flow to cover its likely to grow ~4% dividend while also paying down debt, which will improve both its profitability and its stock value. J.M. Smucker’s products and brands are leaders, including Hostess. I don’t think this will be a huge winner, but I do think there’s relatively safe upside here. I should note that another of my idea sources, Thomas Lott, mentioned SJM on Cash Flow Compounders; I had already been looking at the company for a while, but it’s always good to see a smart investor following it.”
The J. M. Smucker Company (NYSE:SJM) has demonstrated strong cash flow generation, enabling it to consistently pay dividends to shareholders. In the latest quarter, its operating cash flow reached $404.2 million, up from $177 million in the same period last year. The company’s free cash flow also grew significantly to $317.2 million, compared to $28.2 million in the prior year.
Currently, The J. M. Smucker Company (NYSE:SJM) pays a quarterly dividend of $1.08 per share, which was increased by 2% in July of this year. With 23 consecutive years of dividend growth, SJM is a reliable option for retirees. The stock’s dividend yield on January 6 came in at 3.90%.
According to Insider Monkey’s database of Q3 2024, 30 hedge funds held stakes in The J. M. Smucker Company (NYSE:SJM), compared with 34 in the previous quarter. The consolidated value of these stakes is more than $834.5 million. With over 1.6 million shares, Ariel Investments was the company’s largest stakeholder in Q3.
3. Bristol-Myers Squibb Company (NYSE:BMY)
Dividend Yield as of January 6: 4.38%
Bristol-Myers Squibb Company (NYSE:BMY) is a New York-based pharmaceutical industry company. It has achieved its success through innovative cancer treatments and strategic acquisitions. Its oncology portfolio features pioneering immunotherapy drugs that have significantly improved patient care. This solid market position generates substantial cash flow, which in turn supports returns for shareholders. The stock has surged by nearly 9.5% in the past 12 months.
In the third quarter of 2024, Bristol-Myers Squibb Company (NYSE:BMY) reported nearly $12 billion in revenue, reflecting an 8.5% increase compared to the same period last year. This strong performance was fueled by higher sales from its growing oncology portfolio and effective operational management. The results underscored the company’s ability to manage competitive challenges while achieving substantial revenue growth. By the end of the quarter, the company had around $8 billion in cash and cash equivalents.
Bristol-Myers Squibb Company (NYSE:BMY) is a reliable dividend payer, having raised its dividends for 16 consecutive years. Moreover, the company has never missed a dividend in the past 93 years, which makes it one of the best dividend stocks for an early retirement portfolio. With substantial cash reserves, the company has the ability to boost its payouts going forward. Over the past twelve months, it generated $15 billion in operating cash flow and $17.52 billion in levered free cash flow. Its quarterly dividend comes in at $0.62 per share for a dividend yield of 4.38%, as of January 6.
Bristol-Myers Squibb Company (NYSE:BMY) was a popular buy in Q3 2024, as 70 hedge funds tracked by Insider Monkey held investments in the company, up from 61 in the previous quarter. The stakes held by these hedge funds are worth more than $3.3 billion in total. Among these hedge funds, Pzena Investment Management was the company’s leading stakeholder in Q3.
2. Realty Income Corporation (NYSE:O)
Dividend Yield as of January 6: 5.96%
Realty Income Corporation (NYSE:O) is an American real estate investment trust company that invests in single-tenant commercial properties in the country. The company operates a highly efficient and resilient business model, with tenants responsible for the majority of property expenses. Its extensive portfolio includes over 15,450 properties across all 50 US states and several European countries, leased to 1,552 tenants spanning 90 industries. This broad diversification, along with a focus on recession-resistant sectors such as grocery, pharmacy, and convenience retail, helps maintain a strong occupancy rate of 98.7%.
Realty Income Corporation (NYSE:O)’s forward-focused strategy strikes a balance between stability and innovation. Its expansion into Europe targets a vast $8.5 trillion net lease market, offering geographic diversification and new growth opportunities. The company’s investments in emerging sectors like digital infrastructure and gaming further strengthen its portfolio’s resilience and income potential. Recent acquisitions worth $740 million in Q3 2024, along with property sales totaling $249 million, demonstrate careful portfolio management, maintaining a balance between growth and stability.
Realty Income Corporation (NYSE:O) has implemented a proactive capital recycling strategy, selling properties that no longer align with its long-term goals and reinvesting in higher-yield opportunities to boost portfolio income. This strategy supports sustainable dividend growth, evidenced by 652 consecutive monthly dividends and over 30 years of annual increases. It currently offers a monthly dividend of $0.264 per share and has a dividend yield of 5.96%, as of January 6.
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 23 funds held stakes in Realty Income Corporation (NYSE:O), growing from 19 in the previous quarter. The total value of these stakes is more than $163.5 million. With over 1.7 million shares, AEW Capital Management owned the largest stake in the company.
1. Verizon Communications Inc. (NYSE:VZ)
Dividend Yield as of January 6: 6.79%
Verizon Communications Inc. (NYSE:VZ) is a New York-based telecommunications company that offers services in communications, technology, information, and entertainment. The company is appealing to income investors due to its strong financial foundation, reinforcing its status as a reliable dividend payer. In the first nine months of the year, the company generated $26.5 billion in operating cash flow and $14.5 billion in free cash flow. With 18 consecutive years of dividend increases, Verizon continues to prioritize delivering value to its shareholders. It offers a quarterly dividend of $0.6775 per share and has a dividend yield of 6.79%, as recorded on January 6.
In 2023, Verizon Communications Inc. (NYSE:VZ) faced difficulties in its consumer business, with wireless subscriber growth lagging behind its competitors. Its smaller consumer wireline segment, which provides broadband services, also saw limited growth, primarily due to a competitive promotional environment. In addition, macroeconomic challenges affected the growth of its business wireless and wireline sectors, as companies reduced spending on telecom upgrades. However, in the first nine months of 2024, the company’s consumer revenue grew by 0.9% year over year, while business revenue dropped by 2.1%, leading to overall revenue growth of 0.3%. The recovery in the consumer segment was driven by targeted incentives and marketing efforts, alongside the completion of its strategic initiatives, including recent acquisitions.
Third Point Management also highlighted the company’s acquisition in its Q3 2024 investor letter. Here is what the firm said:
“While some economic activity has been showing signs of slowing, the defensive composition of the current high yield market with a high mix of higher quality credit and short duration has let the rates tailwind overwhelm such concerns. The lowest quality sectors of the market have performed best, fueled by both soft/no landing expectations, as well as two positive events in the beleaguered telecom space. Telecom/cable have been poor performers year to date due to overhang from the growth of FWA (aka “wireless cable”) and increased fiber building, however the sector re-rated materially on two deals. Second, Verizon Communications Inc. (NYSE:VZ) announced a deal to acquire Frontier Communications (FYBR), a transaction which the fund benefited from by virtue of its investment in FYBR debt. This transaction, aimed at increasing’s VZ fiber footprint, has led to broad revaluation of fiber retail networks that we think is appropriate. While we continue to expect to see FWA rapidly erode non-upgraded cable and especially copper’s share of the low-end broadband market, the VZ deal underscores the value of the higher end footprint.”
At the end of Q3 2024, 57 funds held stakes in Verizon Communications Inc. (NYSE:VZ), compared with 67 in the previous quarter. These stakes have a consolidated value of more than $3.2 billion. With nearly 25 million shares, GQG Partners was the company’s largest stakeholder in Q3.
Overall, Verizon Communications Inc. (NYSE:VZ) ranks first on our list of the best dividend stocks for an early retirement portfolio. While we acknowledge the potential for VZ to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than VZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
