Dividend Heaven: 7 Standout Stocks for Income Investors to Buy in June Dividend Heaven: 7 Standout Stocks for Income Investors to Buy in June (2024)

Building a solid retirement portfolio to carry you through your golden years requires just a few key ingredients like income reliability, dividend growth and exceptional yield. That’s because retirement is not the time to take fliers on penny stocks. You want solid companies with a proven track record of paying a dividend that is well-supported with sufficient free cash flow (FCF).

Yet a static dividend would be detrimental to surviving retirement because the ravages of inflation will eat away at your earning power. That’s why a steadily growing dividend well beyond the rate prices are rising ensures you make it through in fine form.

Last, you want to get the most bang for your buck out of dividend stocks so investing in high-yield income-generating stocks means you will earn more money for every dollar invested.

Below are seven dividend stocks to put you in seventh heaven that you should buy today.

Altria (MO)

Tobacco giant Altria (NYSE:MO) hits all three key points perfectly. The biggest U.S. tobacco stock has paid a dividend for 54 years and increased it every year thereafter. It has actually raised the payout 58 times over that period. Altria is a Dividend King.

Over the past decade, the owner of the iconic Marlboro brand, which commands a 42% market share, has raised the dividend at a compounded annual growth rate (CAGR) of 7%. Ideally I’d prefer seeing double-digit rate increases but for a mature company like Altria, that is quite respectable. Moreover, it generates sufficient FCF to support the payout, growing cash profits at a 7.9% CAGR for the past 10 years.

On the surface, Altria’s FCF payout ratio of 74% seems extremely high but because of the nature of its business, the tobacco company is targeting a payout ratio of 80% so there are no worries there. The dividend yields an enticing 8.6% annually.

The smokeless tobacco market (electronic cigarettes, nicotine pouches, chew tobacco and more) will more than offset over time the secular decline in traditional cigarettes.

Realty Income (O)

In a similar vein, real estate income trust (REIT) Realty Income (NYSE:O) should be a high-priority dividend stock to buy. The REIT created the popular monthly dividend payment and even bills itself as The Monthly Dividend Company.

Since its 1994 NYSE listing, Realty Income has made 647 consecutive monthly dividend payments. For the last 107 straight quarters, it has raised the payout and has a 9.2% 10-year CAGR on increases. While the last quarterly hike to 26.25 centers was in the 2% range, remember this is happening four times a year.

Realty Income also throws off lots of cash profits too. FCF has grown over the past decade at a CAGR of almost 19% a year. Over the last five years, though, the REIT has increased FCF by more than 22% annually. The dividend yields 5.7% a year.

However, with a REIT, you don’t look at FCF. Instead, you want to check its adjusted funds from operation, or AFFO. That’s a metric similar to FCF for REITs. Realty Income’s AFFO payout ratio also stands deceptively high at 74% but because REITs are required by law to distribute 90% or more of their profits to shareholders as dividends, O stock’s AFFO payout ratio shows the dividend is secure.

Exxon Mobil (XOM)

Oil and gas giant Exxon Mobil (NYSE:XOM) is another dividend stalwart to buy. The largest, publicly traded oil stock can trace its roots back John D. Rockefeller’s Standard Oil Trust. It was one of the 34 different companies created when the Supreme Court broke up the trust (back then it was Standard Oil of New Jersey, which became Esso and then Exxon).

As a result, the oil company has an almost equally long history of paying a dividend and it has raised the payout at a CAGR of 3.5% for the last decade. While I would also prefer its rate of increases to be higher, Exxon has stated many times paying its dividend is one of its top priorities.

During the pandemic, Exxon was one a just a very few oil companies that did not cut or suspend the payout. Although many analysts had predicted it would because at one point oil was trading for a negative $37 a barrel, Exxon withstood the pressure. That’s likely because its 10-year CAGR for FCF growth stands at over 11% annually.

Like many oil stocks, Exxon is an easy target for politicians to criticize for the excess profits and high gas prices at the pump. But oil companies don’t set prices at the pump; supply and demand in the local markets do. Exxon’s FCF payout ratio of 44% indicates the dividend is not only safe but there is plenty of room for future growth. The payout yields 3.4% annually and has been increased for 41 consecutive years.

VICI Properties (VICI)

Casino REIT VICI Properties (NYSE:VICI) is a much newer dividend stock than Exxon or any of the previous companies covered. Created as a spinoff from Caesars Entertainment (NASDAQ:CZR) in 2017, it primarily owns the real estate the casino stock’s gambling houses sit on. It also owns the real estate of MGM International‘s (NYSE:MGM) MGM Grand in Las Vegas.

Being new means it doesn’t have a 10-year history of dividend payments. For the time it has been around, though, VICI’s track record is impressive. The casino REIT has a 7.3% CAGR for five years while growing FCF 43% annually. Yet like Realty Income, we are more concerned with AFFO, which has increased 8.3% a year. That is more than sufficient to cover its dividend payments.

VICI’s dividend yield is 5.8% annually making it an attractive investment option.

As one of only two REITs focused on the casino industry (Gaming & Leisure Properties (NASDAQ:GLPI) is the other), VICI Properties is a bet on the continued growth of gambling generally, and in Las Vegas particularly.

Johnson & Johnson (JNJ)

Pharmaceutical giant Johnson & Johnson (NYSE:JNJ) deserves consideration as well as a top-tier dividend stock. It is another Dividend King but one that faces a storm of headwinds. The stock is down 5% year-to-date and 16% below its 52-week high.

Because of its deep pockets, Johnson & Johnson was targeted for helping foment the alleged opioid crisis (most deaths were caused by heroin and illegal fentanyl, not opioids). Still, between it and several drug distributors, they have been forced to pay a combined $21 billion over 18 years.

Other lawsuits include tens of thousands of cases over talc in its baby powder that allegedly caused ovarian cancer and mesothelioma. That is despite decades of research showing talc is safe. JNJ is seeking to settle for $6.5 billion.

Putting these cases behind it is important as it will allow the company to focus on growing its drug portfolio. Its top-selling plaque psoriasis drug Stelara will soon face new competition from biosimilars. But it has an arsenal of industry-leading drugs in its pipeline that are expected to grow 5% to 7% annually from 2025 to 2030. Nearly a dozen are expected to generate $5 billion in peak-year sales and an additional 15 are foreseen to generate $1 billion to $5 billion in peak-year sales.

A lot of Johnson & Johnson’s cash has been going to its settlements so its 10-year FCF CAGR is a low 2.8%. Dividend growth is 6% and the FCF payout ratio has grown to 64%. Normally a worrisome trend but one I expect to get back on track once the pharma stock puts these lawsuits behind it.

Agree Realty (ADC)

Agree Realty (NYSE:ADC) is a REIT that focuses on several niche markets including tire and auto centers, home improvement retailers and grocery. Among its biggest tenants are Walmart (NYSE:WMT), Tractor Supply (NYSE:TSCO) and Dollar General (NYSE:DG). Nearly 90% of its tenants are national retail chains. With no single sector accounting for more than 10% of the total, Agree Realty is well diversified.

Founded in 1971 and publicly traded since 1994, the REIT has grown its dividend at a better than 6% annual rate. AFFO has grown at a 5% CAGR in the last five years. Agree forecasts full-year AFFO to be between $4.10 to $4.13 per share, meaning AFFO has more than doubled since 2012. The REIT’s AFFO payout ratio stands at 76% and the dividend yields an attractive 4.9% annually.

Agree Realty stock remains solid financially with over $1 billion in available liquidity. It is a stock you can buy and never sell.

Schwab U.S. Dividend Equity ETF (SCHD)

The last stock to put you in dividend heaven is Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD). The beauty of exchange-traded funds (ETF) is they give you broad sector coverage at low risk and cost. One share of SCHD stock costs $78 compared to $195 for a single share of its largest holding Texas Instruments (NASDAQ:TXN).

SCHD’s dividend yields 3.4% annually but it has increased the amount of dividends it pays investors since going public 13 years ago at an average rate of 12% annually. The stock’s total return over that time frame is 357% or 13% annually. The ETF’s goal, though, is to track the total return of the Dow Jones U.S. Dividend 100 Index.

It is important to note that SCHD’s dividends aren’t static but fluctuate quarter to quarter. That means that although it is a rare occurrence, the payout can decline. However, dividends have never decreased from one year to the next.

Schwab U.S. Dividend Equity ETF has over $54 billion in assets under management and charges shareholders a super-low expense ratio of 0.06%. With no dividend stock in its portfolio accounting for more than 5% of the total (TXN stock is at 4.75%), you have an extremely well-diversified portfolio that offers significant downside protection.

On the date of publication, Rich Duprey held a LONG position in MO, O, XOM and JNJ stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.