Last Sunday, after demanding a full day off from work, I slept in, brewed a fresh pot of some ridiculously good coffee, lounged around until about 10:30am, had a bite to eat with my girlfriend, then started my day. For the next 12 hours or so I wrote an article for Seeking Alpha, had lunch with friends and even found some time to exercise. Then it occurred to me: this has been one of the best days of my life. How could I make it happen again?
I've heard retirement and productive leisure can actually be a reality for some lucky folks out there. Is this true? If so, tell me how to achieve it. Come on... I want in.
Though I'm only 28, I'll be honest and let you older investors out there know that I'm on to you. The truth is, I began figuring out in my 20s how to secure a future in which retirement is actually possible. To sum it up for those of us who haven't quite caught on yet, investing often (and early) allows for the systematic accumulation of wealth in our golden years due to the power of compounding. (Oh, and accumulating dividends consistently over time doesn't hurt either.)
You see, from a young age, I somehow figured out maxing out my Roth IRA, contributing fully to my employer-matched 401(k) and dumping as much money as I could into high yielding dividend-paying stocks might actually be a good idea. So far, over the last three years, I can honestly say I've been happy with my decision to invest. Though the future may not be as kind to us as the recent run up over the last few years, there's no doubt in my mind that investing a significant amount of my earnings is a good idea over the long haul.
With that concept in mind, I'd like to share with you a five faithful dividend stocks which really need no introduction. I've been happily accumulating shares of these companies over the last three years and look forward to collecting their dividends for many years to come.
1. Abbott Laboratories (NYSE:ABT) is a diversified health care stock with a market cap of $86 billion and a 52 week range of $45.28 to $56.84. Though ABT is trading near its 52 week high, its sporting a 3.5% dividend yield and has been paying out a dividend to investors since 1924. Since ABT has been raising dividend payments for so many decades, it's reasonable to believe ABT will continue to do so, rewarding shareholders handsomely in the future. ABT may not be a screaming buy at the moment at these prices, but it would behoove investors to keep a close eye on its share price for pullbacks.
2. Johnson & Johnson (NYSE:JNJ) is yet another company which needs no introduction. Despite recent challenges over the last few years, I believe JNJ to be an excellent stock moving forward over the next decade or so. With a forward P/E of 12, over $11 in cash per share, a dividend yield of 3.5% and a payout ratio of 64%, I believe shares to be fairly valued at the moment. Analysts expect JNJ to perform rather disappointingly in 2012 and maybe even into 2013. With that said, however, I expect JNJ to be a winner over the next few decades and I'm happy to pick up shares over the not-so-distant future, accumulating a modest stake in this stalwart with a consistent and admirable dividend yield.
3. ExxonMobil (NYSE:XOM) has faithfully increased its dividend every year since 1982. Though it's only providing investors with a 2.2% yield, XOM's payout ratio is incredibly manageable at 22% which means we will likely see dividend hikes in the not-so-distant future. With $420 billion in annual revenue and $11 billion cash on hand, it's a safe argument that XOM will continue to reward shareholders for many more decades to come. I began buying shares in the high $50s in 2010 and feel comfortable adding to my holdings even today in order to get on board for future growth with a modest dividend.
4. Target (NYSE:TGT). Sure, the great debate rages on regarding which retailer, Target or Walmart (NYSE:WMT), will produce superior gains for retired investors. Truthfully, I love everything about Target, from its fun, light-hearted marketing to its clean and well-stocked shelves and value-driven prices. Target has paid dividends out to shareholders since 1965 and has raised its dividend every year for over 40 years. With a payout ratio of only 25%, TGT's 2.3% dividend has room to run. I feel very comfortable adding to my positions when TGT dips below $50 a share and I look forward to living off the dividend income decades from now.
5. Exelon (NYSE:EXC) is a company with quite a bit of bearish sentiment at the moment. With an ongoing controversial merger, fluctuations with natural gas prices, fears of nuclear factory meltdowns, pension plan worries and potential regulation changes at the state and national level, investors seem to be fleeing from the stock. I suppose if I were retired and counting on a continuous stream of revenue from my dividend stocks, I too would be closely debating holding EXC. However, since I'm rather young and can take the "risk," I have been adding to my holdings while EXC hovers near its 52 week low. With a current dividend of 5.3% and a payout ratio of only 56%, I'm loving this stock at the moment. I've added to my holdings despite many investors worries that EXC may be in some serious trouble. Call me crazy, but I believe EXC is a deep value play at the moment and I wouldn't expect share prices to stay this low for too long.
Sure, being as young as I am, you might point out I have a long way to go before retirement. Probably even decades. However, nonetheless, I'm looking forward to that glorious day where I'll be able to lead a full and productive retirement life with a basket of safe, reliable dividend-paying stocks like the companies mentioned above. Best of luck out there, younger investors -- don't forget to contribute often and early!