Investing is a process that shifts over time. And hitting retirement can be a real game-changer, since you no longer have an income to rely on. The goal shifts from growing your nest egg to living off it. And that makes income and safety incredibly important. Finding the right mix of both is the key.
ExxonMobil (XOM 1.15%), Emerson Electric (EMR -0.67%), and Consolidated Edison (ED 0.96%) have each proved over decades that they will keep rewarding you in good times and bad.
Image source: Getty Images
The energy giant
ExxonMobil is one of the world's largest integrated energy companies. It does everything from pulling oil and gas out of the ground to transporting it, refining it, and delivering it to end customers. That mix provides balance to the portfolio because the refining business tends to do well when the drilling business isn't, and vice versa. That's not to suggest that Exxon doesn't go through its ups and downs, but it helps to dampen the swings.
And it's generally more conservative than its competitors. For example, Exxon has among the lowest debt levels of its gigantic peers. It's also one of the best run companies in the industry, with a return on invested capital that has long been at the top of the group. But the real proof is in Exxon's ability to keep its head above water. While most of its peers have seen earnings dip into the red at some point since oil began to tumble in mid-2014, Exxon has managed to stay in the black.
And then there's the dividend. Exxon currently yields around 3.6%, a nice number on an absolute basis and toward the higher end of its historical range. Perhaps more important, that distribution has been increased every year for 34 years. Knowing that Exxon, one of the best oil companies in the world, has sent out dividend checks in good times and bad and has given shareholders a raise every year should help you stay invested no matter what storms are hitting the market.
Bits and electrical pieces
Image source: Emerson Electric.
The next company beats Exxon's dividend record by 26 years. Emerson Electric has increased its annual disbursement for an amazing 60 years running. The company is a global industrial giant, with major operations in automation and commercial and residential products, which includes products from heating and air conditioning to closet systems.
The big picture here, however, is the company's penchant for change. For example, when data centers started to increase in importance, Emerson jumped into the business. As competition heated up, returns weren't living up to its expectations, and it sold the division in December 2016 to focus on its higher-margin businesses. That divestiture was a key driver behind the company's 120-basis-point business segment margin improvement in the first quarter. Being able to change and adapt is what's kept the dividend growing for six decades and that will help keep you around no matter what's going on in the markets.
Data source: YCharts.
Although Emerson's yield of around 3% is fairly enticing in today's low-yield world, it's in the middle of the road historically for the industrial conglomerate. So it's hard to suggest that this is a great time to jump aboard, but it might be a good time to initiate a starter position with plans to buy more when the yield gets into the 3.5% to 4% range.
Powering the city
Consolidated Edison is a boring old utility that's made big changes to its business model over time. The old way of doing things is to make electricity and then deliver it. But the way electricity is generated, not to mention where it's generated, is in a massive state of flux. The shift toward cleaner energy options is the most notable evidence. What hasn't changed nearly as much is how the energy gets delivered, and that's what this utility is primarily focused on today.
ConEd, as it's affectionately known, basically passes the cost of electricity right through to customers while collecting what amounts to a toll for maintaining the wires that keep the lights on. So ConEd has shifted its business model in such a way that further changes in the broader industry shouldn't have a major impact on its business. The company also provides natural gas and steam (yes, that's a business).
Then there's where it operates -- dynamic and power-hungry New York City and its surrounding suburbs. Growth will come from spending to upgrade the reliability and safety of its wires and pipes. However, the company is also investing in the future of the power industry by expanding its footprint in the contracted energy sector (ConEd is the fifth largest owner of solar power in the country, though it's still just a small part of the utility's business), along with large-scale transmission lines and natural gas pipelines, among other things.
Where ConEd is today, versus where it expects to be in the future. Image source: Consolidated Edison.
The ability to adjust along with the market is one of the reasons ConEd has been able to increase its dividend for 43 consecutive years. That said, the current yield of around 3.7% is kind of low, based on the company's history. So now probably isn't the best time to jump aboard, even though the yield is notable on an absolute basis. However, it would be a good idea to keep ConEd on your watch list with a yield target above 4%. It's also important to temper your expectations for earnings growth. Don't look for much more than the historical low-single-digit earnings growth rate over the long term. It is a regulated utility, after all.
Now and later
Exxon is a stock you can buy now to help you stick to your retirement goals. You could dip your toes into Emerson, with plans to increase your stake on pullbacks. And ConEd is a name to keep on your watch list for a more enticing entry point. That gives you some stuff to do now and some stuff to do later. All three, however, have proved year in and year out that they care about their shareholders by consistently paying and increasing their dividends, in good times and bad. That should make it easy for you to keep invested after retirement.
