Spend any time researching how to construct an ideal nest egg, and you'll quickly find that including dividend stocks is paramount. The guaranteed return you'll get via quarterly payouts may seem small at first, but the power of compounding and reinvested returns is undeniable.
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If you're looking to start funding your own retirement portfolio with dividend payers, we've got a little bit of everything for you here: a real estate investment trust (REIT) with a huge dividend, a beer maker with a smaller, but still substantial payout, and a fast-growing e-commerce specialist with a small, but growing, dividend.
Below, three Motley Fool investors tell you why National Retail Properties (NYSE: NNN), Anheuser-Busch (NYSE: BUD), and Mercadolibre (NASDAQ: MELI) are three dividend payers primed to help grow your nest egg.
A rock-solid REIT
Brian Feroldi (National Retail Properties): The recent retail downturn has caused Wall Street to flee from all kinds of companies that have exposure to the industry. The broad-based sell-off has hit National Retail Properties' stock hard, which on the surface, makes sense since the company leases its free-standing locations exclusively to retailers. However, when you dig into the details, National's business continues to look far more healthy than the stock price is implying.
Unlike other REITs, National exclusively rents out its properties under triple net-lease terms. These agreements call for the tenant to pay for all variable property expenses such as maintenance, insurance, taxes, and more. This reduces National's financial exposure and turns the company into a check-cashing machine.
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What's more, National's customers are required to sign long-term leases. This helps to keep its occupancy rates very high, even during downturns. And finally, National avoids retail concepts that are susceptible to online competition. That's why you'll primarily find service businesses in its portfolio like movie theaters, restaurants, and convenience stores.
When combined, these factors have helped National to pay out a rising dividend for more than 27 years in a row. That's an impressive accomplishment that can only be pulled off by a rock-solid business.
And yet, despite its rock-solid business model, National's stock is down more than 25% from its all-time high, which has pushed its dividend yield above 4.5%. That makes this a great income stock for value investors to get to know.
A stock to raise a glass to
Rich Duprey (Anheuser-Busch InBev): Don't worry about slowing beer sales -- Anheuser-Busch InBev has the industry covered. Completely. Not only is it the King of Beer of mass-brewed suds like Budweiser, Bud Light, and Stella Artois, but it has a growing portfolio of craft beers that range from its in-house Shock Top brand to about a dozen or so small breweries it's bought, like Goose Island, Blue Point, and 10 Barrel Brewing.
It's also gotten into the homebrew market with the purchase of the two biggest supply houses to the industry, Northern Brewer and its sister operation Midwest Supplies. Moreover, it's also picked up a passel of distributors that further bolsters its already muscular distribution network.
Anheuser-Busch, together with Molson Coors, controls around three-quarters of the U.S. beer market -- some 45% all by itself -- and has a 28% share of the global market. And while U.S. beer sales are flat or slightly falling, worldwide sales remain healthy.
Even with the slowdown underway in the craft-beer industry, it's still expanding each year, rising 6% last year. In fact, there are more than 5,000 breweries operating in the U.S., more than at any time in the country's history. With its feet now firmly planted in the homebrew market from where many, if not most, craft breweries spring, beer remains a strong industry, albeit a bit saturated.
Anheuser-Busch also pays a dividend of $3.90 per share that currently yields a tasty 3.5%. Analysts are forecasting that the mega brewer will continue growing earnings at better than 15% annually for the next five years, so investors can entrust their nest eggs with its shares.
This dividend is tiny... for now
Brian Stoffel (Mercadolibre): I decided to write about the biggest dividend payer that's funding my own nest egg. That company -- which occupies 4% of my real-life retirement portfolio -- is Latin American e-commerce specialist Mercadolibre.
It's important to note that, at 35 years old, I still have three decades before retirement, so I'm focused more on growth than income right now. The dividend itself isn't the impetus for investing in Mercadolibre -- it currently offers just a 0.3% yield -- paltry by almost any standard. Part of that is because the stock has advanced by 170% since last February, and part of it is because it's actively reinvesting in growth opportunities.
But that's why I think the company is an excellent bet to help fund your retirement portfolio over the long run. The company operates in Latin America, a region of the world where Internet penetration is reaching a tipping point, and the middle class is growing at a healthy clip. The company is protected by the network effect and high switching costs, meaning that investments for the future are dollars well spent.
As for the dividend itself, it's very healthy: Over the past 12 months, only 11% of Mercadolibre's free cash flow was needed to make the payout. And between 2011 -- when the dividend was first paid -- and 2016, investors saw their quarterly checks increase by 13% per year.
Because Mercadolibre's business model is capital light, cash flow will increase substantially when investments in growth opportunities tamp down. That will likely lead to a lower multiple on the stock, but it will also mean an increased payout.
As it is, if the company wanted to, it could septuple its payout tomorrow without running into serious cash problems. Just imagine what it'll be like 10 years from now, when cash flows are stronger, and capital needs aren't.
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Brian Feroldi owns shares of MercadoLibre. Brian Stoffel owns shares of MercadoLibre. Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Anheuser-Busch InBev NV and MercadoLibre. The Motley Fool has a disclosure policy.