3 Stocks to Supplement Your Social Security Income

Social Security isn't meant to replace your entire paycheck. It's basically expected to be a safety net that provides a backstop for your income in retirement. That means you should be looking to supplement your Social Security income with other sources of cash, like dividend-paying stocks, but you'll want those dividends to be material and backed by solid companies. Enterprise Products Partners L.P. (NYSE: EPD), Duke Energy Corporation (NYSE: DUK), and W.P. Carey Inc. (NYSE: WPC) are three great options to consider.

1. A midstream giant

Enterprise Products Partners is one of the largest midstream energy companies in North America, offering a generous distribution yield of roughly 6%. It owns the pipelines, processing facilities, storage, and ports that help move oil, natural gas, and the products into which they get turned around the country (and world). Most of this master limited partnership's revenue is fee based, often supported by take-or-pay contracts that require payment even if an asset isn't fully utilized by a customer.

Enterprise has a long history of operating in a conservative manner. For example, its financial debt to EBITDA ratio is around 4.3 times, which is toward the low end of the midstream industry. And the cash it has available to pay distributions has historically covered its distribution by 1.2 times or more -- even through the deep oil downturn that hit the energy sector in mid-2014. That's ample protection for the distribution and leaves plenty of room for distribution growth.

Speaking of distribution growth, Enterprise has increased its distribution for 21 consecutive years. The average increase over the past decade has been around 5% or so, though recent increases have been in the low single digits. That's a temporary move intended to allow Enterprise to shift toward a business model in which it self-funds more of its own growth. In a year or so, investors should expect distribution growth to tick back up to historical levels, which beat inflation and protect the buying power of your income. If you are looking for a boring high yield, Enterprise fits the bill.

2. A utility giant

Duke Energy is one of the largest utilities in the United States. Its dividend yield is currently around 4.6% -- toward the high end of the utility sector. The company's business spans the electric and natural gas spaces, including utilities, long-haul transportation assets (natural gas pipelines), and a renewable merchant power operation. The vast majority of its business is regulated, or fee-based, providing a solid foundation for the dividend.

As a regulated utility, Duke has to spend money on upgrading its system in order to convince regulators to allow it to raise customer prices -- the trade-off for being granted a monopoly in the regions it serves. Over the next five years, Duke intends to spend $37 billion, which management believes will support earnings growth of 4% to 6% a year. That, in turn, should support dividend growth of a similar amount. The dividend has been increased 14 consecutive years.

Duke is not an exciting company by any means. In fact, it might be among the most boring you could own. But it provides a vital product (energy) and has a slow and steady path toward higher earnings and dividends. It can provide a cornerstone to your portfolio, allowing you to buy higher-yielding, and perhaps slightly riskier, stocks.

3. A giant triple-net lease REIT

Last up is real estate investment trust, or REIT, W.P. Carey. This company owns a large portfolio of triple-net lease properties. The tenants of triple-net lease assets pay for most of the operating costs of the buildings they occupy. Carey focuses on buying assets directly from companies and then leasing them right back to those companies, which often use the sales cash to fund expansions, acquisitions, or simply to shore up their balance sheets. By originating the leases, though, Carey gets to write the terms of the agreement, which often leads to higher rates of return.

Carey currently yields around 6.5%. It has increased its dividend annually for 21 consecutive years. However, the key story here is diversification. Many of the company's peers are U.S.-focused and have a very heavy concentration in the retail sector. Carey stands out from the pack: Roughly a third of its revenue comes from outside the U.S. (mostly Europe), and its portfolio spans the industrial (29% of rents), office (24%), retail (16%), warehouse (16%), and self-storage (5%) segments. "Other" makes up the rest.

W.P. Carey isn't the highest-yielding REIT, and it isn't the fastest-growing. But it has a long history of deftly shifting its investment to the locations in which it can find the best returns. Note the low exposure to retail, which is a conscious decision. And much of the retail exposure it does have is in Europe, where the retail sector isn't as heavily developed as it is in the U.S. market. Flexibility is one of Carey's biggest draws as an investment, since it can keep growing its portfolio in just about any market. Which, of course, means it can keep rewarding you with slow and steady dividend hikes.

Time for some digging

Now that you've gotten a taste of what Enterprise, Duke, and W.P. Carey have to offer, it's time for some deep dives. If you're looking for reliable dividend-payers that can generate income to supplement your Social Security checks, each of these high-yielders is worth a very close look. You won't find anything surprising about this trio, but that's really the point -- nobody wants an income shock in retirement.

10 stocks we like better than Enterprise Products PartnersWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Enterprise Products Partners wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018

Reuben Gregg Brewer owns shares of W. P. Carey. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.