3 Safe Dividend Stocks To Boost Your Retirement Income In Times Of Distress

  • Stock Market Analysis
  • Editor's Pick

During the past decade, a combination of moderate interest rates and a favorable macroeconomic environment sent growth stocks flying, casting a shadow over most value-focused, dividend-paying companies.

But with inflation surging and markets going through a rough patch, that trend seems to have reversed sharply. As a result, dividend yield and value have become equity-factor leaders for the year.

While dividend-paying companies can offer investors safer places to park their money, that doesn't mean a risk-free investment. Stocks providing higher yields, for example, often fall into a market segment where it's hard to predict the company's future growth.

Therefore, if you're picking such a stock for your retirement portfolio, due diligence is the key. It's essential to select stable companies with a solid history of rewarding their investors.

With this theme in mind, we have shortlisted three relatively safe dividend stocks you can consider holding in your retirement portfolio over the long run.

1. United Parcel Services

The time is ripe to buy United Parcel Service (NYSE: UPS ) after its recent pullback. The global logistics company is down 16% this year on concerns that a looming recession will hurt demand for the shipment and logistics services.

UPS closed Tuesday at $179.92, with an annual dividend yield of 3.34%.UPS Weekly

However, according to a Credit Suisse (SIX: CSGN ) note this week, UPS belongs to a group of quality companies that have strong management teams and solid balance sheets to support their payouts in the long run.

The note says:

"We see many transportation companies as having strong fundamentals to support their valuations, with less dependence on upbeat narratives relative to other areas of the market. We believe current valuations present many attractive opportunities for investors with a long-term horizon."

UPS has a solid two-decade history of raising its dividend. In February, the Atlanta-based parcel company announced a 49% quarterly dividend per share hike to $1.52--the most significant dividend raise in the company's corporate history.

In the future, UPS plans to distribute 50% of its adjusted diluted EPS in dividends.

Credit Suisse rates UPS as a "best-in-class" business with a high dividend yield and "superior" margins.

"We believe UPS's discount to the broader market under-appreciates the strength of its core business and the difficulty of replicating its network in scale and service."

2. Cisco

Cisco Systems (NASDAQ: CSCO ) is another well-positioned cash-rich company prepared to deal with the possible market downturn by continuing to pay uninterrupted dividends. The San Jose-based networking giant is the world's largest producer of routers, switches, and other gear companies use to connect computers. It closed Tuesday at $43.06.

CSCO Weekly Chart

Cisco has meaningfully improved its future growth prospects after an aggressive diversification drive away from hardware to a software-driven model within new, high-growth market areas, like cybersecurity, applications, and services.

These growth initiatives, coupled with the company's dominant position in the Americas, which generates most of its sales, have positioned the company to outperform when the macroeconomic risks decrease.

Cisco has also made Credit Suisse's list of outperform-rated tech stocks, which were hit hard in the current market downturn. Still, they have strong free cash flows to keep dividends coming to investors' bank accounts.

Cisco has raised its payout every year during the past 12 years, making it an attractive option for those seeking growing income. The company currently pays $0.38 a share quarterly dividend with an annual yield of 3.47%.

3. Verizon Communications

During times of economic turmoil, telecom utilities offer good value as they are considered reliable income generators. No matter the economy's direction, internet and wireless connections will be among the last items consumers delete from their must-have lists.

This predictability and stickiness increase their investment appeal to retirees. Verizon Communications (NYSE: VZ ) has a solid appeal to retirees in this space. The company currently pays $0.64 a share quarterly payout which, at Tuesday's closing price of $50.46, translates into an annual dividend yield of 5.02%.

VZ Weekly

The US's largest wireless carrier is expected to produce future growth from initiatives like selling mobile subscribers higher-priced 5G unlimited data plans, offering wireless home broadband, and securing partnerships with big tech companies.

Verizon is collaborating with Facebook parent Meta Platforms (NASDAQ: META ) to explore a range of metaverse opportunities from the future of hybrid work/collaboration to metaverse-related consumer experiences.

Telecom shares may not provide hefty capital gains, particularly when compared to high-growth stocks. But these stocks are defensive and help retirees in times of economic distress.


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