BERKO: Dividend-paying stocks for a comfortable retirement
Dear Mr. Berko:
We’re in our early 50s and are good savers. The house we bought for $127,000 in 1989 is paid for. We didn’t take out home equity loans like many of our neighbors did. We have a 6-year-old car and a 9-year-old van, both paid for. We have no credit card debt. Both of us work for the state of Illinois, and we’re afraid that our underfunded retirement accounts will be gone when we retire. Together we make $116,000 and have $278,000, which includes EE and E bonds, six utilities with a reinvestment plan and $65,000 in savings. We want to put $35,000 in dividend growth stocks for our retirement. We hope we can work at least 15 more years and collect Social Security.
S.D., Aurora, Ill.
Dear S.D.:
Holy marbles. I’ll bet you have no kids. You folks need to become better consumers. You’re setting a bad example for your contemporaries, and if other Americans imitate your spending habits, our economy’s going to be in worse trouble!
Lots of other Illinoisans are also concerned – with good reason – about their state’s retirement plan. The Illinois pension plan reminds me of a clapboard, tar paper and plywood shack sitting up on cinder blocks. And our Social Security system doesn’t look much better.
Here are some stocks I like. Each has a low payout ratio and a decent yield, and I think each is capable of double-digit dividend growth in the coming five years.
• Vodafone Group plc (VOD-$28.32) provides mobile phone service to 380 million customers. VOD yields 6.8 percent and should grow its dividend 12 percent annually.
• Lockheed Martin Corp. (LMT-$76.35) is an important military and aerospace contractor. LMT yields 5.2 percent, and the dividend can grow 13 percent annually.
• Raytheon Co. (RTN-$42.44) is a huge government defense contractor yielding 4.1 percent. Its dividend can grow 12 percent a year.
• Intel Corp. (INTC-$24.70) is the largest computer chip maker in the world. It yields 3.4 percent, and its dividend should grow 10 percent annually.
• Molex Inc. (MOLX-$24.49) is a $3.6 billion manufacturer and designer of electronic parts. MOLX yields 3.3 percent, and the dividend can grow 14 percent annually.
• Avista Corp. (AVA-$25.18) is an electric utility in Washington state. Its current dividend yields 4.4 percent, and 10 percent annual dividend growth is on track.
• Wisconsin Energy Corp. (WEC-$32.48) is a fine utility that yields only 3.2 percent but is capable of raising its dividend 15 percent annually.
• Unilever plc (UL-$33.67) is a worldwide producer of consumer consumables. The dividend yields 3.8 percent and should show 10 percent annual dividend growth.
• Finally, Sempra Energy (SRE-$54.19) is a diversified utility company out of San Diego. The dividend yields 3.5 percent, and 10 percent annual increases should be expected.
If you invest $35,000 in these eight issues, your current return will be around 4 percent – or $1,400 in first-year income. However, if you reinvest the dividends each quarter for 15 years, your annual income should be in the neighborhood of $8,300 a year. And that’s a 27 percent dividend return on your $35,000 investment.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or email him at malber@adelphia.net. ©2011 Creators.com
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