Retired investors have different investment needs than investors still in the accumulation phase. Retirees require a mix of current income, safety, and growth that is difficult to find. This article examines 12 dividend stocks that match retirees needs for current income, safety, and growth.

Each of the 12 dividend stocks below has 25+ years of dividend payments. Each has a dividend yield above 3%. Each has a below-average stock price standard deviation. Finally, each of these 12 dividend stocks has showed earnings-per-share and dividend-per-share growth over the last decade well above inflation.  The 12 dividend stocks for retirement are analyzed in detail in the next sections of this article.

Southern Company

Dividend Yield: 5.0%
Projected Growth Rate: 3% to 4%
Stock Price Standard Deviation: 17%

Southern Company (SO) is one of the largest publicly traded utilities in the United States. The company currently has a market cap just under $40 billion. Southern Company has generated over $2 billion in income over the last twelve months.

Southern Company supplies electricity to 4.5 million customers in Georgia, Alabama, Mississippi, and Florida. The company generates 91% of its earnings from its utility businesses. The remaining 9% of earnings come from the company’s competitive wholesale electric business. Southern Company’s operations consist of the following subsidiaries and affiliates:

Southern Company has paid steady or increasing dividends since 1982. The company also performed exceptionally well during the Great Recession. Southern Company’s earnings-per-share through the Great Recession and subsequent recovery are shown below to illustrate its excellent performance during this difficult time:

Southern Company’s long history of growth and stability are evidence of its competitive advantage. Southern Company’s competitive advantage is its monopoly electricity provider status in the markets it serves. Electric utilities are natural monopolies due to the high cost of building power plants and high switching costs. To illustrate this point, most people don’t relocate simply because they don’t like their utility provider.

Southern Company is expecting earnings-per-share growth of between 3% and 4% in 2015. Investors should expect long-term earnings-per-share growth of around 3% to 4% in 2015 and beyond. Utility income growth tends to be stimulated by GDP growth in the area it serves.  The GDP in Southern Company’s service area is expected to grow at 3% in 2015, and Southern Company should match or slightly exceed this growth. As with most utilities, investors should not expect rapid growth from Southern Company. Total returns should be between 8% and 9% from growth (3% to 4%) and dividends (5.0%).

General Mills

Dividend Yield: 3.1%
Projected Growth Rate: 7% to 9%
Stock Price Standard Deviation: 17%

General Mills (GIS) is one of the largest packaged food manufacturers in the world. The company currently has a market cap of $33 billion. General Mills generated $1.4 billion in income over the last 12 months from its global food operations.

General Mills has paid dividends for 116 consecutive years. The company’s longevity speaks to its sustained success. General Mills also performed very well during the Great Recession and through the subsequent recovery. The image below from General Mills’ investor relations shows the company’s adjusted-earnings-per-share growth through the Great Recession and subsequent recovery:

General Mills’ competitive advantage comes from its strong brands. An outline of some of General Mills more popular and well-known food brands by category is below.

Cereal
Cheerios
Chex
Wheaties
Lucky Charms
Trix

Healthy/Natural/Organic
Annie’s
Cascadian Farms
Immaculate
LARA Bar
Food Should Taste Good

Baking Products
Betty Crocker
Pillsbury
Bisquick
Gold Medal
Yoki

Other
Haagen-Dazs ice cream (joint venture)
Progresso soup
Yoplait yogurt
Gardetto’s
Nature Valley

General Mills supports its portfolio of high quality consumer food brands with significant advertising spending. The company has spent between $840 and $920 million each year on advertising since 2010. General Mills is a global business. It’s high quality brands, strong advertising, and global reach form its competitive advantage.

2015 is projected to be a difficult year for General Mills. The company is restructuring to reduce expenses. Cereal consumption is declining in the United States and other developed markets as consumers slowly switch to healthier options. General Mills plans to counteract this trend by focusing on the health aspects of its cereals such as ‘gluten free’ and ‘low sugar’.

General Mills has compounded shareholder wealth at 11% a year since 1995. The company is targeting continued shareholder growth around this number. Growth will come from share repurchases, operating income gains (7% to 9%), and dividends (~3%). General Mills shareholders should expect total returns of around 11% after 2015, in line with the company’s historical average.

Kimberly-Clark

Dividend Yield: 3.2%
Projected Growth Rate: 5% to 9%
Stock Price Standard Deviation: 17%

Kimberly-Clark (KMB) manufactures and sells disposable consumer products. The company owns five brands that generate $1 billion or more per year in sales. These 5 brands are: Kleenex, Kotex, Huggies, Pull-Ups, and Scotts. Kimberly-Clark sells its products in over 175 countries. The company has grown to have a market cap of nearly $40 billion. Approximately 25% of the world’s population uses Kimberly-Clark products.

Kimberly-Clark is a Dividend Aristocrat. The company has increased its dividend payments for 43 consecutive years. Kimberly-Clark has also performed well during recessions. The company’s low-cost branded consumer goods products do not see demand fall sharply during recessions. The company only saw earnings-per-share dip slightly through the worst of the Great Recession. Kimberly-Clark’s earnings-per-share over this time are shown below:

Kimberly-Clark’s competitive advantage stems from its strong brand names and global distribution network. Kimberly-Clark’s brands are of the highest quality. The Kleenex brand in particular is so ubiquitous that many people call tissues by the brand name ‘Kleenex’ – even when they aren’t Kleenex brand. Kimberly-Clark has grown its share of the adult care market from 51% in 2009 to 59% due to strength in its Kotex, Poise, and Depend brands. In addition, Kimberly-Clark controls 39% of the baby and child care market through its Huggies, Pull-Ups, GoodNites, Little Swimmers brands.

Kimberly-Clark is a global business. The company sells its products in over 175 countries. Kimberly-Clark is currently restructuring its supply chain to more efficiently manufacture and distribute its products. A competitor would have to grow for decades to establish the same supply chain scale that Kimberly-Clark has.

Kimberly-Clark posted 5% constant-currency sales growth in its most recent quarter. Constant-currency sales growth in developing and emerging markets grew 11%. Constant-currency adjusted earnings-per-share grew 8% versus the same quarter a year ago.

Over the last decade Kimberly-Clark has grown its earrings-per-share at 5.2% a year. The company is expecting adjusted-earnings-per-share of 5% in fiscal 2015. Over the next several years, earnings-per-share are expected to grow at 5% to 9% a year. Kimberly-Clark shareholders can expect total returns of 8% to 12% a year from dividends (~3%) and earnings-per-share growth (5% to 9%).

Procter & Gamble

Dividend Yield: 3.3%
Projected Growth Rate: 6% to 10%
Stock Price Standard Deviation: 18%

Procter & Gamble (PG) is the largest packaged goods company in the world. The company has a market cap of $216 billion. Procter & Gamble controls a total of 23 brands that generate $1 billion or more each year in sales. The infographic below from the company’s investor relations shows the longevity and scale of Procter & Gamble.

Procter & Gamble is a Dividend King thanks to its 58 consecutive years of dividend increases. The company has been in business for 177 years. Procter & Gamble is among the longest lived publicly traded corporations. The company’s long history of success is due to its presence in the slow-changing packaged consumer goods industry.