Retirees who purchase stocks for investment income often have to settle for low yielding stocks. The S&P 500 Index yields just 1.3% right now, on average.

However, there are plenty of high dividend stocks that have strong current yields above 4%, and also have secure dividend payouts that can grow over time.

The following 3 dividend stocks have high dividend yields and safe payouts, which makes them attractive for retirement income.

T. Rowe Price Group (TROW)

T. Rowe Price Group is one of the largest publicly traded asset managers. The company provides a broad array of mutual funds, sub-advisory services, and separate account management for individual and institutional investors, retirement plans and financial intermediaries. The firm had assets under management of more than $1.6 trillion as of September 30th, 2024. 

T. Rowe Price is a Dividend Aristocrat, having increased its dividend for 38 years in a row. 

On November 1st, 2024, T. Rowe Price reported third quarter results for the period September June 30th, 2024. For the quarter, revenue grew 6.9% to $1.79 billion, though this was $60 million below estimates. Adjusted earnings-per-share of $2.57 compared favorably to $2.17 in the prior year and was $0.22 more than expected. 

During the quarter, assets under management (AUM) improved $61.8 billion, or 3.9%, to $1.63 trillion. Market appreciation of $74 billion was partially offset by $12.2 billion of net client outflows. Operating expenses of $1.17 billion increased 7.6% year-over-year, but just 0.3% quarter-over-quarter.

T. Rowe Price’s earnings, as well as its dividends, have grown substantially over the last decade. While earnings did drop during the last financial crisis, the overall record has been solid. Since 2014, the company has grown earnings-per-share by an average compound rate of 5.9% per annum. Moreover, the company performed well in 2020. 

Asset managers like T. Rowe have low variable costs. As a result, higher revenues, driven primarily by increasing assets under management, allow for margin expansion and attractive earnings growth rates. Assets under management grow in two basic ways: increased contributions and higher underlying asset values. While asset values are finicky, the trend is upward over the long-term. 

On the contribution side, T. Rowe Price’s strong past performance is a key selling point and could attract customers going forward. In addition, T. Rowe has another EPS growth lever in the way of share repurchases.

TROW stock currently yields 4.3%.

Black Hills Corp. (BKH)

Black Hills Corporation is an electric utility that provides electricity and natural gas to customers in Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming.

The company has 1.33 million utility customers in eight states. 

Its natural gas assets include 47,000 miles of natural gas lines. Separately, it has ~9,000 miles of electric lines and 1.4 gigawatts of electric generation capacity.

Black Hills Corporation reported its third quarter earnings results on November 6. The company generated revenues of $402 million during the quarter, down 1% year-over-year.

Black Hills Corporation generated earnings-per-share of $0.35 during the third quarter, which was below the consensus analyst estimate. Earnings-per-share were down by close to 50% versus the previous year’s quarter.

On average, earnings-per-share grew by 3% to 4% annually in the 2014-to-2023 time frame, which is a solid growth rate for a utility. The swings in Black Hills’ profits are primarily based on the impact that weather conditions have on the demand for electricity, for cooling in summer, and natural gas, for heating in winter. 

Growth over the coming years depends on several factors. This includes rate reviews, which drive revenues and profits per kWh. Another factor is the expansion of the company’s existing assets via new utility infrastructure. Black Hills regularly adds new projects to its growth investment backlog. Black Hills’ planned growth investments include new electric transmission lines and new natural gas pipelines to service its customers. 

Rate reviews will allow Black Hills to recover investments into its existing systems, thereby more or less guaranteeing increasing revenues over time as long as volumes on existing systems remain unchanged in the long run, which should lead to rising profits down the road. 

As the company exited its oil business a while ago, the increased focus on its core utility business is a positive for Black Hills, as this allows for more consistent and reliable growth.

BKH has increased its dividend for over 50 years, placing it on the Dividend Kings list. Shares currently yield 4.6%.

Universal Corporation (UVV)

Universal Corporation is the world’s largest leaf tobacco exporter and importer. The company is the wholesale purchaser and processor of tobacco that operates between farms and the companies that manufacture cigarettes, pipe tobacco, and cigars. Universal Corporation was founded in 1886 and is headquartered in Richmond, Virginia. With 54 years of dividend increases, Universal Corporation is a Dividend King. 

Universal Corporation reported its second quarter earnings results on November 7. The company generated revenues of $710 million during the quarter, which was more than the revenues that Universal Corporation generated during the previous period. Revenues were positively impacted by product mix changes, while larger and better-yielding crops also had a positive impact on the company’s top-line. 

Additionally, Universal Corporation sold carryover crops during the period, which added to the company’s revenue performance. Universal’s adjusted earnings-per-share totaled $1.10 during the quarter, which was way better than the results seen in the previous quarter, when Universal only generated a very minor profit. The company has not provided guidance for the current fiscal year, but comments indicate that demand is healthy.

As the leader in a declining industry, we do not expect the company to deliver strong business growth in the future, with some price increases over time being one of the few levers Universal can pull in the long run. The company’s earnings per-share could still rise over the next couple of years, however. 

UVV shares trade at a moderate valuation based on the earnings and cash flows that the company generates, and Universal Corporation also does not need to invest large amounts of money into its business, as the industry is not experiencing any meaningful growth. 

This gives Universal Corporation the ability to utilize a substantial amount of its free cash flows for share repurchases. Through a declining share count, Universal Corporation could generate some earnings-per-share

UVV has increased its dividend for over 50 years, and the stock currently yields 6.0%.

Disclosure: No positions in any stocks mentioned