Retire Rich: 3 High-Yield Dividend Stocks You Can Set and Forget | The Motley Fool (2024)

Although there are countless investing strategies, the stock market does offer some near certainties.

For example, each and every one of the past 37 stock market corrections -- a decline of at least 10% from a recent high -- in the S&P 500 since 1950 have been completely erased by a bull market rally. If you buy into a diversified basket of companies and hold for an extended period of time, this data suggests that you'll make money.

Income investing can help you retire rich

But that's not the only near guarantee you'll get from looking at investing data. A quick glance also shows that dividend-paying companies have historically outperformed their nondividend-paying peers over the long run. And this really shouldn't come as that much of a surprise given that dividend-paying stocks tend to be profitable and have time-tested business models. Being able to reinvest your payouts back into more shares of dividend-paying stock is one of the most commonly used strategies by professional money managers to compound the wealth of their clients.

However, this brings us to one of the greatest dilemmas of dividend investing: the association of yield to risk. Generally speaking, the higher the yield, the higher the risk involved. Since yield is a function of share price, a failing business model with a declining share price can trick income seekers into buying a lemon. In short, we want high-yield dividend stocks to buy (i.e., those with 4%-plus yields), but with as little risk as possible.

If your goal is to retire rich, or simply continue to compound the wealth you've already accrued during retirement, here are three high-yield (and diverse) dividend stocks you can practically set in your portfolio and forget about for a long time.

AT&T

As someone who began investing right as the dot-com bubble was getting its legs, I can attest that just saying the name "AT&T" (T 0.23%) makes me want to shut my eyes and fall asleep. It feels like a virtual dinosaur with cloud companies and artificial intelligence developers cropping up out of the woodwork in the tech sector. But despite the relative boringness of AT&T's business model, it does two things very well: It makes money, and it passes a good chunk of these profits to its shareholders.

You probably know AT&T best for its wireless business, and this core operation could see a nice boost in growth beginning in 2020 and beyond. Following hefty investments in 5G technology, AT&T is laying the groundwork to roll out these higher-speed networks to new cities around the country. With 5G-capable smartphones only recently beginning to hit stores, the expectation is that faster download speeds and a more data-hungry consumer should lead to a long-lasting upgrade cycle for AT&T. Remember, data is where the bulk of AT&T's wireless margin power lies, so a more data-driven consumer should yield higher average revenue per user.

AT&T also stands to benefit from its Time Warner acquisitions. Bringing popular networks like CNN, TBS, and TNT under its umbrella should help lure traditional content seekers, as well as video streamers. More importantly, with the election season right around the corner, and more advertising bargaining power than it's arguably ever had, AT&T should see significant gains in the ad revenue department.

All told, AT&T has the potential to grow profits by the low-to-mid-single digits each year, all while remaining a Dividend Aristocrat. This 6% yield is about as safe as it gets, making it the perfect set-and-forget income stock.

Duke Energy

If you want to power your portfolio into retirement without having to do much of anything, then perhaps electric and gas utility Duke Energy (DUK -0.36%) is the stock you should consider buying. Though its business model is about as exciting as watching paint dry, Duke delivers for its investors.

Maybe the most important thing you should know about Duke Energy is that its electric and gas utility operations are regulated businesses. This simply means that Duke can't pass along price hikes whenever it chooses to do so, but must instead submit requests to state regulatory commissions and wait for their approval. This might sound like a major inconvenience, but it's actually a godsend for investors. Regulated utilities make for highly predictable businesses. Since demand for electricity and gas remains fairly constant -- after all, almosteveryone needs one or the other to power their homes -- Wall Street knows what to expect from Duke, and the company understands how much it can spend on infrastructure projects without wrecking its bottom line.

This is also a company that's eager to modernize its electric-generating capacity. Right now, Duke Energy supports about 3 gigawatts of combined solar and wind capacity, but has plans to invest $2.5 billion in commercial renewables between now and 2023. Part of this spending includes bringing 700 megawatts of solar online in Florida by 2021. Although renewables are expensive up-front investments, their lower operating costs become really beneficial over time.

Finally, don't overlook the fact that we've entered a low interest rate environment. With utilities often leaning on debt to finance infrastructure projects, these lower lending rates should make those future projects a bit less costly.

Duke's 4.2% yield could truly be a bright spot in your income portfolio.

Philip Morris International

But if you're after a smoking hot high-yield stock, then Philip Morris International (PM 0.34%) is the name you may want to consider.

There's no denying that adult smoking rates are on the decline in quite a few developed countries, including the United States. Additionally, this is a company that profits from the addictive nature of nicotine, meaning as a so-called "vice stock" it's not going to be for everyone. But if you're not limited by the parameters of socially responsible investing, then Philip Morris could be the stock for you.

The key to Philip Morris' success is its geographic diversity. It operates in more than 180 countries around the world, and the highly anti-tobacco United States isn't one of those countries. Even in developed nations where it's seeing a decline in cigarette shipment volume and a pushback against tobacco, Philip Morris has just as many, if not more, emerging market economies with burgeoning middle classes that are looking for simple luxuries. The ability to buy tobacco products are one of those luxuries. Thus, between its geographic diversity and strong pricing power, vis-à-vis the additive nature of nicotine, Philip Morris is able to grow sales and profits, even if tobacco cigarette shipments are weak.

Technology and innovation will also play an important role in Philp Morris' long-term growth. The company's IQOS heated-tobacco system delivers nicotine to users without many of the added chemicals they'd take into their lungs by smoking a tobacco cigarette. As of the company's most recent quarterly report, the number of IQOS systems in use – they were recently launched on a more global scale – more than doubled in Europe to over 1 million from the year-ago quarter, with heated-tobacco unit shipments rising 20% to 11.5 billion. Make no mistake about it, we're still a long way from a smokeless future, but Philip Morris is laying the groundwork for whatever comes its way.

At 5.7%, the safety of Philip Morris' yield is tough to match.