High-Yield Stocks You Can Count On for Retirement Income
Every other day, I get a question in my mailbox that reads like this: “Where can I find some good high-yield stocks for retirement income right now?”
I get the question a lot, for good reason. In a bid to stave off a COVID-19-induced economic depression, the Federal Reserve has slashed interest rates to basically zero percent. That has zapped the retirement income of anyone invested in bonds or bank CDs.
The recent stock market rally hasn’t helped matters, either. At the time of this writing, the dividend yield on the S&P 500 has dropped to a record-low 1.6%. At that rate, even a six-figure nest egg won’t generate much in the way of retirement income.
But that doesn’t mean finding a decent yield is impossible.
One of my favorite tools to find great income ideas is to run a simple screen for high-yield stocks. This technique can allow you to generate a lot of new ideas quickly, making it easy to flag companies for further research.
This week, I wanted to search for high-dividend stocks that could generate reliable retirement income. My screen included three criteria:
- Companies must have a market value of at least $25.0 million
- Companies must have a dividend yield of at least 10%
- Companies must have a dividend coverage ratio of at least 100%
This last point is key.
The dividend coverage ratio divides how much a business earns in profit by how much it pays out in distributions. So the higher the better.
By only including high-yield stocks with a dividend coverage ratio above 100%, only businesses with sustainable distributions show up in the results.
Let’s dig into this list of high-yield stocks.
Retirement Income High-Yield Stock Screen
|
Company Name |
Market Cap |
Dividend Coverage |
Trailing Yield |
|
DHT Holdings Inc |
$893.0 Million |
174% |
35% |
|
Invesco Mortgage Capital Inc |
$609.0 Million |
131% |
32% |
|
Frontline Ltd |
$1.3 Billion |
199% |
30% |
|
MV Oil Trust |
$31.1 Million |
100% |
26% |
|
Euronav NV |
$1.7 Billion |
204% |
20% |
|
Nordic American Tanker Ltd |
$493.0 Million |
250% |
17% |
|
VOC Energy Trust |
$34.3 Million |
100% |
17% |
|
Phillips 66 Partners LP |
$5.8 Billion |
111% |
14% |
|
PBF Logistics LP |
$542.0 Million |
143% |
14% |
|
Delek Logistics Partners LP |
$1.2 Billion |
108% |
13% |
|
Torm PLC |
$526.0 Million |
389% |
13% |
|
Crossamerica Partners LP |
$637.0 Million |
131% |
13% |
|
BP Midstream Partners LP |
$1.2 Billion |
121% |
13% |
(Source: Trading Central, last accessed November 18, 2020.)
Before going any further, let me make one thing clear about these results: the names above don’t represent “buy” recommendations. It’s always important to emphasize that stock screens only serve as a starting point for further research.
That said, you can find some interesting ideas on this list.
MV Oil Trust (NYSE:MVO), for instance, is the ultimate cash-cow business. The partnership operates a collection of oil wells. But unlike traditional energy companies, management doesn’t invest in expansion projects or new drilling operations. Instead, executives pay out all of their free cash flow to unitholders—which explains why the trust sports a double-digit yield.
BP Midstream Partners LP (NYSE:BPMP) is another interesting name in the energy space. This partnership, in fact, doesn’t drill for oil or gas at all. Instead, BP Midstream owns a collection of energy pipelines that crisscross the Gulf Coast and the southern U.S. Because the volume of commodities flowing through these networks is incredibly consistent, investors have long counted on this name for steady distributions.
Bottom line: This screen revealed a number of interesting high-yield stocks for retirement income. Just be sure to do your homework before pulling the trigger on any specific name. Savvy investors want to buy real dividends, not troubled businesses.