The 10 Best Dividend Stocks For Retirement

Retirement Dividend Stock: Consolidated Edison, Inc. (NYSE:ED)

Consolidated Edison, Inc. (NYSE:ED) is an electricity and gas utility corporation with operations in New York, New Jersey, and Pennsylvania. The company is one of the larger utilities in the United States and serves over 3 million customers.

Source:  Consolidated Edison Investor Relations

What’s most impressive about the company is its long dividend history. The company has paid rising dividends for 42 consecutive years.

The company has a well-above-average dividend yield of 3.4% at current prices. Consolidated Edison combines a fairly high yield with extreme consistency.

The utility industry is very slow changing. People will very likely still need gas and electricity to their house (or at least electricity) 50 years from now – just as they did 50 years ago.

Consolidated Edison investors benefit from the company’s low risk business model by not ‘losing any sleep’ over the future of the company.

The company’s primary growth driver is incremental GDP growth in the areas it serves. This means Consolidated Edison will likely be able to increase its dividends at about the pace of inflation – or a bit faster.

In total, I expect Consolidated Edison to grow earnings-per-share at 3.5% a year. This growth combined with the company’s dividend yield gives investors an expected total return of 7% a year.

7% a year expected total returns is not eye-catching. When one considers the ultra-low risk of Consolidated Edison’s business model, it’s risk adjusted total returns look much more appealing. Consolidated Edison stock is similar to a bond – that can pay rising income year after year.

Consolidated Edison, Inc. (NYSE:ED) is currently trading for a price-to-earnings ratio of 17.7. The company is likely trading around fair value at current prices given today’s low interest rate environment.

Retirement Dividend Stock: SCANA Corporation (NYSE:SCG)

SCANA Corporation (NYSE:SCG) is an electricity and natural gas utility with operations in North & South Carolina and Georgia.

Source: SCANA Morgan Stanley Utilities Presentation, slide 1

SCANA is focusing heavily in growing its nuclear power generating capabilities. The company currently generates 20% of its power from nuclear sources. By 2021, it expects to generate 55% of its power from nuclear.

The company has been able to pass increasing rate increases to help pay for the cost of expanding its nuclear power operations.

SCANA has higher expected earnings-per-share growth than Consolidated Edison because the company operates in states that are seeing faster population growth. SCANA is expecting earnings-per-share growth of 4% to 6% a year over the next several years.

Dividends should grow at the same 4% to 6% a year pace. The company’s stock currently has a 3.5% dividend yield – well above the S&P 500’s 2.2% dividend yield.

Investors should expect total returns of 7.5% to 9.5% a year from SCANA from earnings-per-share growth and dividends.

SCANA has increased its dividend payments in 61 of the last 65 years. The company’s operations are especially stable due to natural geographic competitive advantage enjoyed by utilities. Utilities are highly regulated – and SCANA is no exception. The company has some room for additional growth as it is earnings a bit less than government mandated maximums.

SCANA Corporation (NYSE:SCG) is currently trading for a price-to-earnings ratio of 17.7. The company is likely trading around fair value given its solid expected total returns and low risk operations.