Retirees want their portfolios to provide safe, consistent, reliable income that grows faster than the pace of inflation.

Retirees want investments that will protect their nest egg, allow them to sleep easy at night, and provide steady income.

Dividend stocks perfectly match retirement investor needs. Dividend stocks can also lead to early retirement.

Investing in high quality dividend growth stocks provides retirees with consistent, reliable, growing dividend income.

But…

Not all dividend stocks are created equal.

Some are high risk – high yield stocks. They can be appealing to retirees, but they are dangerous.

The last thing you need in retirement is for your nest egg to get scrambled.

Other dividend stocks have fantastic growth potential and a high degree of safety – but have very low yields.

These stocks may make good investments for younger investors. They do not make good investments for dividend investors in retirement because they don’t satisfy retirees’ income needs.

The best dividend stocks for retirees have the following characteristics:

Finding great businesses like this can be very challenging…

But to find the best dividend stocks for retirees now, you must match all of the criteria above and make sure the stock is trading at fair or better value.

This article examines the 10 best dividend stocks for retirement today. All 10 stocks match the requirements discussed above.

Retirement Dividend Stock: Archer-Daniels-Midland

Archer-Daniels-Midland (ADM) is one of the largest agricultural product businesses in the world. The company originates:

Retirees should take notice of Archer-Daniels-Midland. The company is one of the highest ranking stocks using The 8 Rules of Dividend Investing.

Here’s why Archer-Daniels-Midland ranks so highly – the company has a high dividend yield of 3.2%, a reasonable payout ratio of ~50%, a strong competitive advantage, 41 consecutive years of dividend increases, and a long-growth runway ahead. Best of all, it is deeply undervalued at current prices.

Archer-Daniels-Midland’s competitive advantage comes from its excellent global supply chain. The company has:

The company’s competitive advantage and continuous growth is what has allowed the company to pay increasing dividends for 41 consecutive years.

Growth is not over at Archer-Daniels-Midland. The long-term growth driver for the company is growing global populations. Growing populations mean more food. More food leads to more profits for Archer-Daniels-Midland shareholders.

In the shorter run, the company is growing through shedding low margin businesses and acquiring higher margin businesses. Recent acquisitions include:

These acquisitions will lead to greater stability in Archer-Daniels-Midland’s earnings.

The one downside to the stock is its fluctuating earnings. Archer-Daniels-Midland’s profits are cyclical due to fluctuations in commodity prices and currencies. Right now, the company is in at a cyclical low point.

Don’t confuse this cyclicality with riskiness. Archer-Daniels-Midland’s 41 year history of consecutive dividend payments shows the company prioritizes its dividends. The company’s management keeps payout ratios fairly low to offset earnings cyclicality. Even at current cyclical earnings lows, the company has a safe 50% payout ratio.

The company’s cyclical downturn has made the stock a bargain. Archer-Daniels-Midland is trading near all-time dividend yield highs.

Source: Sure Dividend

Investors don’t like to see falling earnings – even if it is at a cyclical company that will rebound.

ADM is currently trading for an adjusted P/E ratio of just 12.4. ADM’s historical median P/E ratio over the last decade is around 13.5.

Earnings-per-share are depressed at $2.98/share. Keep in mind earnings are currently depressed. Under normal conditions the company’s earnings would likely be around $3.50 per share.

Using ‘normal’ EPS of $3.50 and the company’s median average P/E ratio of 13.5 implies a fair value of ~$47 per share. Archer-Daniels-Midland is currently trading at ~$37 per share and has 27% upside at current prices.

Retirement Dividend Stock: Flowers Foods

Flowers Foods (FLO) is the second largest baking company in the United States (Grupo Bimbo is larger). Flowers Foods bread and cake brands are better known than the company. Flowers Foods owns the following brands (among others):

Nature’s Own is America’s leading bread brand. The bread industry may seem boring – but the growth that Flowers Foods generates is exciting. The company has compounded earnings-per-share at 13% a year and dividends at 16% a year over the last decade.

Growth should continue far into the future for Flowers Foods. People will be buying bread for a long time…

Flowers Foods has a long growth runway ahead.

The company is a leader in a highly fragmented industry and currently serves just 85% of the US population. Geographic expansion will lead to growth, as will growing out underserved areas geographically.

Source: Flowers Foods Investor Presentation, slide 5

In addition to geographic growth, Flowers Foods will also see benefits from organic bread growth. The company is well positioned to capitalize on this growth through the Dave’s Killer Breads and Alpine Valley Bread brands.

Flowers Foods’ stock currently has an above average dividend yield of 3.3%. The company has paid steady or increasing dividends for 29 consecutive years – the kind of stability retirees need from their dividend investments.