If you’re retired, or even approaching retirement, you should strongly consider dividend stocks.
Dividend stocks provide you with regular stream of cash-based income. You can use this income to support your lifestyle or reinvest to grow your nest egg.
Just be careful: not all dividend stocks are equal.
Choose the right companies you’ll be cruising into retirement with little worry. Choose the wrong companies and your income stream could be slashed or eliminated just when you need it most.
Which dividend stocks are the most reliable? The following picks have rock-solid histories and promising futures.
Trust the data
If you could make a high-confidence prediction that will remain true for several decades, what would you predict? One of your best options is to forecast continued population growth.
When Julius Caesar ruled Rome, the earth’s population was just 150 million. By 1960, it had exploded to 3 billion. Today, it’s over 7.5 billion.
Every day, global populations rise by 220,000 people. This trend is expected to persist (or even accelerate) for at least another 50 years.
How can you benefit from the population explosion? Buy stock in Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP).
As I wrote in December, “Brookfield owns interests in a diversified portfolio of critical infrastructure projects with resilient business models.” All of these projects—including highways, railroads, ports, and power plants—directly benefit from rising global populations.
If you had purchased the stock when my December recommendation was released, you’d be on pace for a 40% annual return.
The drivers fueling Brookfield’s rise should remain for decades to come. With a 3.5% dividend, you’ll get a respectable income stream while watching your nest egg grow.
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Stick with what works
CAE Inc (TSX:CAE)(NYSE:CAE) has only a 1.4% dividend, but that’s partially because the stock has nearly tripled over the last five years. As the business matures, expect this payout to rise dramatically, perhaps reaching 10% or more based on today’s cost basis.
If you’ve ever flown on an airplane, you’ve likely benefited from CAE’s products—it’s one of the leading manufacturers of simulators and training services to airlines and aircraft designers.
As with Brookfield, demand for CAE’s services should increase for decades to come.
The International Air Transport Association believes that airline traffic will nearly double over the next 15 years.
To meet this demand, Boeing Co estimates that 790,000 new pilots will need to be trained. Combine that with rising safety regulations and you have the perfect scenario for CAE shareholders.
Already, the company has 65 locations globally that can train more than 130,000 pilots per year in additional to nearly 90,000 flight attendants. Even a large airline could only train 5,000 to 10,000 internally, making CAE a necessity for growth.
Since 2007, CAE’s dividend has grown by 1,000%. Sure, the dividend yield may look small today, but bet on it doubling and tripling against over the next few years.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Ryan Vanzo has no position in any stocks mentioned. Brookfield Infrastructure Partners is a recommendation of Stock Advisor Canada.