If your goal is to accumulate wealth for a comfortable retirement, then there is no risk-free path. Throughout time every angle has been tried and failed. Inherently, individual stocks will carry higher risk due to the lack of diversification when evaluated on a stand-alone basis.
Sometimes it is desirable to accept higher risk for a higher yield. Other times we may be accepting higher risk and are not being adequately compensated for the additional risk.
You can mitigate some of this risk by selecting solid dividend paying companies with a track record of increasing their dividends each year. Consider this list of higher-yielding (3.25% or greater), lower-risk (1-3 with one being the lowest risk) dividend stocks:
Sonoco Products Co. (SON) makes paper and plastic packaging products serves various industries and markets in more than 85 countries. The company has paid a cash dividend to shareholders every year since 1925 and has increased its dividend payments for 32 consecutive years.
Yield: 3.3% | Risk #: 1.00
Community Trust Bank Corp. (CTBI) owns and operates Community Trust Bank, Inc., which provides commercial banking services in Kentucky, Tennessee and West Virginia; and a trust company. The company has paid a cash dividend to shareholders every year since 1988 and has increased its dividend payments for 35 consecutive years.
Yield: 3.7% | Risk #: 1.00
Old Republic Intl (ORI) is an insurance holding company that engages mainly in the general (property and liability), title, and mortgage guaranty and consumer credit indemnity run-off businesses. The company has paid a cash dividend to shareholders every year since 1942 and has increased its dividend payments for 34 consecutive years.
Yield: 4.1% | Risk #: 1.00
Abbvie Inc. (ABBV) is a global research-based pharmaceuticals business that emerged as a separate entity following its spin-off from Abbott Laboratories at the start of 2013. AbbVie's key drug is Humira for rheumatoid arthritis. The company (and predecessor companies) has paid a cash dividend to shareholders every year since 1926 and has increased its dividend payments for 43 consecutive years.
Yield: 4.2% | Risk #: 1.25
Universal Health Realty Income Trust (UHT) is a real estate investment trust (REIT) that invests in healthcare and human service related facilities. The company has paid a cash dividend to shareholders every year since 1987 and has increased its dividend payments for 29 consecutive years.
Yield: 5.0% | Risk #: 1.25
For a detailed explanation of how I calculate risk, see Finding Low Risk Dividend Stocks.
A good investor will determine the desired outcome and invest in a way to achieve their goal with minimal risk. When it comes to investing your money, there is no escaping risk. Even investing in risk-free Treasuries, carries risk - you risk losing to inflation and running out of money before you run out of life.
Full Disclosure: Long CTBI, ABBV, ORI, UHT. See a list of all my Dividend Growth Stock Portfolio holdings here.
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(Photo: sean carpenter)
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