Nationwide, which is globally renowned financial services firm, conducted a recent survey. As per the results, more than three-quarters of both Gen Z and millennials believe that they will need to continue working even after their retirement as they expect that social security will not be enough to depend on in their old age. Of course, this is a troubling situation, but the good news is that investing in dividend stocks can help in strengthening the prospects for retirement. The value of investments will grow over time and the compounding benefit will be realised. Apart from these values, investors will be able to get recurring cash flow in the form of dividends. Therefore, investing in dividend stocks for retirement will bear fruit in the long-term.
At the time of considering several types of retirement planning, investors are required to consider the benefits to the financial portfolio. One of the critical benefits is securing the type of lifestyle which you have become accustomed to during the time of retirement. As you get older, there can be expected increase in medical requirements or some of the requirement might even change. Therefore, it is of utmost importance to have a reliable investment portfolio which can grow over time and can provide regular streams of dividends. Investing in dividend stocks for retirement will help finance an investor in meeting potential expenses related to the future medical care.
With this in mind, we will now have a look at top dividend stocks for retirement.
1. UnitedHealth Group Incorporated
The company has been categorised as a largest private health insurer, which has obtained significant scale in managed care.
The company’s 3Q23 revenues grew by ~14% to $92.4 billion year-over-year, which includes double-digit growth at both Optum and UnitedHealthcare. 3Q23 earnings from operations came in at $8.5 billion, exhibiting a rise of 14%. Growth in 3Q23 was because of continued increase in number of people which are being served by Optum and UnitedHealthcare and expansion of scope of services which are offered.
In the third quarter 2023, its medical care ratio came in at 82.3% in comparison to ~81.6% last year. This was supported by previously-noted outpatient care, mainly serving seniors, and business mix.
Cash flows from operations for 3Q23 came at $6.9 billion or 1.1x net income. Nine-months to date, the company’s cash flows were $34.3 billion or 2.0x net income and, after being adjusted for CMS payment timing, were $22.4 billion or 1.3x net income. It returned more than $11.5 billion to shareholders during first 9 months of 2023 in the form of dividends and share repurchases. Return on equity of the company was 28% in 3Q23, which reflected the company’s consistent, broad-based earnings and sound capital structure.
The company strengthened the range of FY23 net earnings outlook to $23.60 – $23.75 per share and adjusted net earnings to $24.85 – $25.00 per share.
Leerink Partnrs analyst W. Mayo expects that the company should post earnings of $24.95 per share for FY23, exhibiting a rise from previous forecast of $24.65. Consensus estimate for the company’s current full-year earnings is $24.83 per share.
Cantor Fitzgerald re-initiated an “Overweight” rating on the company’s stock and gave $591.00 price target on shares of the company in a research report dated September 14th. Piper Sandler raised its price target on shares of the company from $580.00 to $584.00, giving the stock an “Overweight” rating.
2. Verizon Communications Inc.
The company is mainly a wireless business (accounting for ~80% of revenue and nearly all operating income). The company serves ~93 million postpaid and ~24 million prepaid phone customers through its nationwide network. As a result, it is the largest U.S. wireless carrier.
On the consolidated basis, the company saw total operating revenue of $32.6 billion, exhibiting a decrease of 3.5% from second-quarter of 2022 and 1H23 cash flow from operations of $18.0 billion, which exhibits a rise from $17.7 billion in 1H22. Revenue decline was primarily due to lower wireless equipment revenue and reduced postpaid phone upgrade activity.
Net income of the company came in at $4.8 billion, which was a decrease of 10.3% year-over-year, and consolidated adjusted EBITDA was $12.0 billion, up 0.8% year-over-year.
Total broadband net additions of the company came in at 418,000, which exhibits strong demand for fixed wireless and Fios products. Result included 384,000 fixed wireless net additions, which was an increase from 256,000 fixed wireless net additions in 2Q22. This was the 3rd consecutive quarter in which the company saw over ~400,000 broadband net additions. Total wireless service revenue of the company came in at $19.1 billion, exhibiting a 3.8% increase year-over-year. This rise stemmed from pricing actions which were implemented over recent quarters, increased allocation of administrative and telco recovery fees from other revenue into the wireless service revenue, and higher contribution from fixed wireless offerings.
In 2Q23, the company saw progress in its critical priorities of increasing wireless service revenue, posting healthy consolidated adjusted EBITDA, and improving FCF. Steps which have been taken by the company to improve its operational performance are working. The company is confident that it will achieve its financial targets for the full year.
For FY23, the company expects adjusted EBITDA in the range of $47.0 billion – $48.5 billion and adjusted EPS of between $4.55 – $4.85. Capital spending is anticipated between $18.25 billion – $19.25 billion.
Morgan Stanley gave an “Overweight” rating on the company’s stock, giving the price objective of $44.00 in the report dated August 3rd.
Conclusion
While above are some of the dividend stocks for retirement, there are several other blue-chip companies which are expected to perform well in the long-term. Investing in dividend stocks for retirement will make sure that investors have enough money for the future which forms part of the financial plan.
Retirement planning benefits might not be the primary concern for the young investors as that stage of life appears to be far away. However, benefits of retirement planning can only be realised if an investor starts early.
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