3 perfect dividend stocks for retirees
Retirees have probably struggled to find promising risk-returns in the market today. A decade of ultra-low interest rates and numerous technological disruptions have allowed growth stocks to shine. Meanwhile, reasonably priced dividend-paying stocks had a harder time. These companies are typically the targets of these disruptions, and the pressure to pay high dividends can limit reinvestment in their companies.
However, there are cases of high dividend stocks that also have defensive business models and strong growth prospects. You may just have to look a little harder.
Today, Brookfield Infrastructure Company (NYSE: BIPC), Bank of America (NYSE: BAC), and Crown Castle International (NYSE: CCI) not only pay strong dividends, but they also have defensible competitive positions, with a path to increase those dividends over time. Here’s why each of these actions is well worth the attention of a retiree today.
Brookfield Infrastructure, as the name suggests, has infrastructure assets globally, in utilities, transportation, mid-level energy and data infrastructure. Despite the drop in energy demand and global trade this year amid COVID, Brookfield’s funds from operations (FFO) grew another 5% in 2020. In fact, the company also just increased by 5% its dividend of 3%.
This shows the resilience of the company’s assets. The transport segment, which is very sensitive to world trade, has only experienced a slight decline and intermediate energy has even increased. Utilities fell, but this was entirely due to the depreciation of the Brazilian real; apart from that, the utilities segment would have grown by 6%.
The star producer, however, is the data segment, which has increased its FFO by 44%. While the data segment only accounted for 13.4% of the company’s total FFO, its strong growth and favorable outlook in the age of 5G should allow Brookfield to maintain or even accelerate its growth rate in the years to come.
Meanwhile, President Biden is reportedly courting lawmakers over a major infrastructure bill, which is the next legislative priority after the US bailout. Since these projects can be very expensive, more public-private partnerships with companies like Brookfield could be in sight.
Crown Castle International
Are you looking to play the growth of 5G infrastructure more directly? Crown Castle International has a return of 3.3% confidence in real estate investment which develops and owns towers, small cells and fiber assets for wireless communications deployment across the United States. Crown Castle builds these assets and then collects rent from the principal telecommunications companies, who will put their 5G radios on Crown Castle assets.
The company just increased its dividend by 11% in December and is aiming for 7-8% growth over the long term. This will be fueled by the growth of 5G. In the recent release of fourth quarter results, CEO Jay Brown said:
We believe our unique portfolio of assets positions us to benefit from what we expect to be a decade-long investment cycle as our clients deploy 5G, thereby expanding the opportunity we see to create value at long term for our shareholders while delivering dividend growth per share of 7 to 8% per year.
Crown Castle has also just signed an agreement with Verizon (NYSE: VZ) for 15,000 small cells, increasing its order book until 2021. This is in addition to a recent agreement of 20,000 turns with DISH Network (NASDAQ: FLAT) inked in November to facilitate DISH’s new effort to create a virtualized 5G network from scratch.
Unlike many tech and 5G-related stocks, Crown Castle stocks haven’t done much over the past year, as industry consolidation has resulted in many Sprint towers being taken out of service. However, as the 5G rollout shifts into high gear after the recent C-Band spectrum auction, Crown Castle may be ready to ramp up again.
Bank of America
Finally, with the rollout of COVID-19 vaccines, the federal government is expected to pass more stimulus soon and the Federal Reserve keeping short-term rates low for the foreseeable future, the economy could experience higher growth and possibly be higher interest rates later this year and into 2022. That could be very good for bank stocks.
In particular, Bank of America is one of the “big four” central banks in the United States and the favorite of Warren Buffett. Since the 2008 financial crisis, CEO Brian Moynihan has positioned BofA as a low risk bank, lending primarily to privileged clients. Although it is diversified with investment banking and sales and commerce, Bank of America is a bit more oriented towards direct lending and banking. yield curve. Therefore, a steeper yield curve would likely help Bank of America more than other banks by placing more emphasis on trading and investment banking.
Bank of America’s results took a hit this year, but really, it was pretty soft. Turnover fell only 6% despite a sharp drop in economic activity. Profit before tax and before provisions fell by only 17% and remained at very profitable levels. And Bank of America started releasing reserves in the fourth quarter, so there could be even more reserve releases in 2021 if credit holds.
In fact, the banks have held up so well that the Federal Reserve recently allowed the big banks to resume share buybacks in 2021. That should certainly help, as Bank of America is still trading at a reasonable 1.1x level. the book value. This should also lead to a resumption of dividend growth for BofA, which today reaches a yield of 2.2%.
With a defensive lending posture well positioned to deal with rising interest rates, Bank of America remains another great choice for retirees today.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.