If your goal as an investor is to create a strong and reliable stream of income for retirement, keeping quality, dividend-paying stocks in your portfolio is essential.

Since 1926, dividends have contributed about 32% of total stock returns, while capital appreciation has contributed 68%, according to research provided by S&P Dow Jones Indices.

One way to build an income-generating portfolio is to use stocks of companies with a consolidated history of increasing their annual payouts. These companies usually run mature businesses that could provide stability and growth for your investments.

With these benefits in mind, we have selected the following three stocks, which could offer both growth and fixed income to current or future retirees:

1. Johnson & Johnson

Our top pick is global pharmaceutical leader Johnson & Johnson (NYSE:). The New Jersey-based healthcare giant is precisely the type of dividend-paying stock retirees — or those planning to retire — should buy. It closed Tuesday at $175.

JNJ stocks are weathering this year’s volatility much better than many other stocks. Propelled by better-than-expected value, JNJ stock is up more than 2% this year during a period when the S&P 500 is down more than 5.2%. The time to buy a dividend-paying stock is also good right now, as COVID-19 becomes less disruptive to the business.

When it comes to rewarding investors, few companies have done better than Johnson & Johnson. It has increased its quarterly dividend every year for 58 consecutive years.

This remarkable performance puts Johnson & Johnson among an elite group dubbed the Dividend Kings, companies with at least five decades of annual dividend increases. JNJ pays $1.06 per share quarterly with an annual yield of 2.42%.

Adding to the compelling case for JNJ: healthcare stocks provide a steady and growing revenue stream as they provide services that remain needed even during a recession. Moreover, economic fluctuations generally do not hinder the deployment of new drugs and medical devices.

2. Bank of Nova Scotia

Over the past few years, buying quality Canadian bank stocks has proven to be a successful game for income investors. The country’s strong economy and strong financial regulatory environment provide a solid foundation for the sector.

The Bank of Nova Scotia (NYSE:), Canada’s third-largest bank, currently offers one of the highest yields among the country’s six largest banks, and it could be a great addition to any retirement portfolio. long-term. Shares closed Tuesday at $74.58.

SNB Weekly Chart

Canada’s major banks typically pay out 40-50% of their income in dividends each year, making them attractive to retirees. Additionally, Canadian lenders are in good shape to take advantage of the post-COVID economic recovery and a spike in demand for commodities, which account for a significant portion of the country’s exports.

At the Bank of Nova Scotia, also known as Scotiabank, chief executive Brian Porter has successfully restructured the lender’s international business by selling small or underperforming operations and doubling down on markets bigger and more promising.

This change seems to be paying off. In the last quarter, the lender’s international unit posted 43% growth in profit year-on-year, helped by lower non-interest expenses.

The bank’s earnings growth has translated into increased dividends for 43 of the past 45 years, one of the most consistent records of dividend growth among large Canadian corporations. Currently, Scotiabank pays a quarterly payout of $0.80, which translates to an annual dividend yield of 4.27%.


The global fast-food chain McDonald’s (NYSE:) offers another solid way to earn ever-growing retirement income. The company has increased its payouts every year since 1976, when it began paying dividends. MCD closed Tuesday’s session at $238.12, down 11.1% year-to-date.

MCD weekly chart

The Chicago-based giant has many of the qualities retirees look for in a high-income stock: a global competitive advantage over its rivals, a strong recurring revenue model and an excellent history of earning its investors.

MCD stock does not look attractive in the short term, given the current macroeconomic environment characterized by rising commodity prices, rising wages and the Russian-Ukrainian war. The company also missed estimates in its latest. Nonetheless, buy-and-hold investors should use this period of inactivity to secure a higher dividend yield.

While lowering his price target on McDonald’s shares to $280 from $290, Oppenheimer said in a note last week that investors should buy the dip, adding that MCD’s above-average exposure to Russia /Ukraine is now fully integrated.

MCD pays quarterly dividends of $1.38 per share. This translates to an annual dividend yield of 2.32% at the current share price. With a manageable payout ratio of 73%, the company is well positioned to continue to generate dividend growth.