Retirement Income Doesnt Have to Be a Dream -- 3 Dividend Stocks That Could Make It a Reality

By Markets

Most Americans hope to have enough income to make it through their retirement. Ideally, Social Security won't expire before they doand their retirement accounts will provide a bit extra so they won't have to move in with their kids. Sadly, the dream of sufficient retirement income is just that for most Americans: a dream. However, what if we told you that adequate retirement income doesn't have to be a dream?

Continue Reading Below

We asked our analysts for their favorite income stocks for retirement. Here are three dividend stocks they believe could turn their dream retirement into a reality.

: Enterprise Products Partners won't win any awards for being a cool company to own. However, the oil and gas pipeline and processing company has been an investment fit to convert retirement dreams into reality for several years now.Just look at the company's long-term stock chart:

EPD Chart

EPD data by YCharts.

As we can see in that chart, this compounding machine's total return is 1,800% over the past two decades when dividends are reinvested, turning a $1,000 investment into $18,000 over that time frame. Even without reinvesting dividends the initial investment still grew to over $5,000 as the quarterly income stream grew. In fact, the company has raised its payout to investors for 42 straight quarters and still has plenty of growth ahead.

Continue Reading Below

With a current yield just under 4.2% Enterprise Products Partners can provide current retirees with solid income for years to come. Meanwhile, it can also provide those of us with dreams of an eventual retirement with quite a compounding machine. This is why it is one of the bedrock stocks in my own portfolio as I dream of a nicer retirement than the one the Social Security Administration is offering.

Tyler Crowe: Like Matt, I also think some of the most boring-sounding investments can be some of the most lucrative. That's why oil refinerHollyFrontier looks so appealing. Turning crude oil into gasoline might seem like a business that will go through massive boom and bust cycles based on the price of oil -- and I'm not going to lie, it is subject to these factors -- but even with these factors working against it, management has built a dividend-paying machine.

HFC Chart

HFC data by YCharts.

HollyFrontier has done this through a few factors:

  1. It has the most complex refineries among U.S. independent refiners, which means it can buy heavy crude oil, which is cheaper but harder to work with than light crude, andtransform it into a high percentage of desirable products, such as gasoline.
  2. It has developed a strong crude supply infrastructure to ensure those disadvantaged crudes reach its refineries.
  3. It has been a disciplined in its capital allocation and has looked to make acquisitions when the market is down and its peers are in financial distress.

HollyFrontier's 3.89% annualized dividend yield might not sound that impressive, but the company has been paying a "special dividend" of $0.50 per shareper quarter for the past 12 consecutive quarters. Add these special dividends to its regular dividend, and the company is yielding 9.9% today. As long as the U.S. uses gasoline -- which looks likely for quite some time -- then HollyFrontier should crank out great income checks for years to come.

Jason Hall:People looking for income from stocks often make the mistake of chasing high yield. While there's nothing particularly wrong with getting the best payout your investment dollars will buy, it can lead to major mistakes. As we all learned fromSeadrill'sstory-- if you missed it, a 20% yield went to zero overnight -- those big payouts can go down (or away) quickly.

A better approach? Invest in stocks that have a record of dividendgrowth.If you're counting on income from your portfolio, you want your payouts to rise over time. Midstream energy giant Phillips 66 is doing just that. Since being spun out ofConocoPhillips in 2012, the company has boosted its dividend three times:

PSX Dividend Chart

PSX Dividend data by YCharts.

Management has committed to increasing it at double-digit rates for at least the next several years.

The 2.9% yield on today's stock price might not look like much, but think about it this way: If youbought the stock in July 2012 for $35, you're getting paida strong5.7% yield on your original investment today.

Furthermore, Phillips 66's core businesses aren't really hurt by low oil prices, meaning a more stable business with predictable cash flow. The cherry on top? An aggressive stock buyback program has reduced shares outstanding by 11% since 2012. That makes increased payouts cheaper, increasing the likelihood the dividend will continue to rise. That is great news if you want your income to grow over time.

The article Retirement Income Doesnt Have to Be a Dream -- 3 Dividend Stocks That Could Make It a Reality originally appeared on

Matt DiLallo owns shares of ConocoPhillips, Enterprise Products Partners, Phillips 66, and Seadrill. He and his wife currently have to drive 30 minutes to go for a walk on the beach. In retirement, they hope to shorten the trip to a walk out the back door. Tyler Crowe owns shares of Enterprise Products Partners and Seadrill andwants to buy a vineyard in retirement, where he will probablyspend his golden years trying to figure why all his wines taste like vinegar. Jason Hallowns shares of Seadrilland hisdream retirement involves lots of travel. He's sure to visitTyler's vineyard, even if he has to say the wine is good. The Motley Fool recommends Enterprise Products Partners and Seadrill.The Motley Fool owns shares of Seadrill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.