You’ll need passive income to live well in retirement, especially with Social Security’s uncertain future. The Office of Retirement and Disability Policy says Social Security’s funds might run out by 2037, which could cut benefits to about 76% of what people get now.
That’s why many investors are turning to dividend stocks for retirement income. But not all dividend stocks are good choices.
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The best high-yield stocks share three key features:
- They’ve paid dividends consistently through good markets and bad ones.
- Their leaders prioritize paying shareholders.
- They have advantages over competitors that help them stay profitable over the long term.
Here are three great high-yield stocks that check all these boxes, making them smart picks for a retirement income portfolio.
Pharmaceutical giant with generous income potential
AbbVie (ABBV -0.24%) stands out in the pharmaceutical landscape with its robust portfolio of immunology and oncology drugs. The company has successfully navigated the challenging transition away from its former blockbuster Humira, demonstrating the strength of its research-and-development (R&D) capabilities.
AbbVie’s newer immunology treatments Skyrizi and Rinvoq have shown impressive growth, with combined sales increasing 51% and 50%, respectively, in 2024. Management expects these drugs to reach $31 billion in combined sales by 2027, representing a compound annual growth rate exceeding 20%.
With a substantial 3% dividend yield, AbbVie offers immediate income that’s 2.5 times higher than the S&P 500 average of 1.2%. While the elevated 259% payout ratio might raise concerns, the company’s strong cash flow and projected 5% average annual revenue growth through 2029 support dividend sustainability.
For income investors seeking exposure to healthcare, AbbVie presents a compelling combination of generous current yield, potential dividend growth, and promising long-term prospects as its next generation of immunology therapies continues to gain market share.
Healthcare stalwart with an exceptional yield
Pfizer (PFE 1.06%) delivers one of the highest dividend yields among large-cap stocks at an impressive 6.6%. The pharmaceutical giant leverages its diversified portfolio across multiple therapeutic areas and a global distribution network to generate consistent cash flow.
Pfizer’s extensive research capabilities and history of successful drug commercialization provide a solid foundation for future growth. The company maintains significant capital resources that enable it to invest in promising research while continuing to reward shareholders.
Despite political uncertainties surrounding healthcare policy, analysts believe the most bearish scenarios for the pharmaceutical industry are unlikely. The bullish themes of solid innovation, productivity improvements, and new technologies continue to support Pfizer’s long-term outlook, along with an aging global population.
Income investors willing to accept some political uncertainty in the healthcare sector can benefit from Pfizer’s exceptional yield, which provides more than five times the income of the S&P 500 index, while waiting for a potential turnaround in the drugmaker’s share price.
Energy major delivering reliable income
Chevron (CVX 1.31%) combines a generous 4.3% dividend yield with the financial stability of one of the world’s largest integrated energy companies. The oil and gas giant recently demonstrated its commitment to shareholders by increasing its dividend by 5%, despite weakness in its downstream operations.
Chevron’s global infrastructure and extensive reserves position it well to benefit from ever-rising energy demand. The company’s management remains focused on capital discipline, cost reduction, and returning cash to shareholders through both dividends and share repurchases.
With a sustainable 67% payout ratio, Chevron offers more dividend security than many high-yield alternatives. Moreover, the company’s projected production growth of 6% per year through 2026 provides a solid foundation for additional dividend increases down the road.
For investors seeking both substantial current income and inflation protection, Chevron represents an attractive option with its combination of high yield, regular dividend growth, and exposure to energy markets that can help hedge against rising prices in inflationary environments.
George Budwell has positions in AbbVie, Chevron, and Pfizer. The Motley Fool has positions in and recommends AbbVie, Chevron, and Pfizer. The Motley Fool has a disclosure policy.
