Social Security might not give you as much security as you'd like.
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For most Americans, Social Security won't be nearly enough to live off during retirement. The federal program wasn't designed to be the sole source for retirement income. But what are smart alternative sources to generate supplemental income?
You should seriously consider owning dividend stocks for part of your retirement portfolio. Three that I think are solid picks for retirees looking to add to their Social Security income are Brookfield Infrastructure Partners (NYSE:BIP), Iron Mountain (NYSE:IRM), and Pfizer (NYSE:PFE). Here's why.
1. Brookfield Infrastructure Partners
Brookfield Infrastructure Partners' middle name reveals the company's focus. If it's related to infrastructure, there's a good chance Brookfield is involved. The company owns and operates cell towers, electricity transmission lines, natural gas pipelines, rail networks, ports, toll roads, and more.
The assets owned by Brookfield generate stable recurring revenue, which allows the company to pay out an attractive -- and growing -- dividend. Over the last five years, Brookfield has increased its dividend by 64%. The dividend currently yields 4.6%.
Brookfield's dividend should be quite safe. The businesses the company is involved in have high barriers to entry, which means Brookfield doesn't have to worry too much about competition. Global infrastructure needs are likely to increase in the future, giving the company significant opportunities for expansion.
One thing to keep in mind with Brookfield Infrastructures Partners is that it's a master limited partnership (MLP). MLPs qualify for preferential tax treatment, so it makes sense to hold Brookfield stock outside of an individual retirement account (IRA).
2. Iron Mountain
Iron Mountain ranks as the world's top provider of records and data storage. The company operates over 1,400 facilities with 87.5 million square feet of storage space. Iron Mountain claims more than 225,000 customers in 53 countries, including roughly 95% of the Fortune 1000.
I view Iron Mountain stock as a dividend investor's dream. Its dividend yield currently stands at nearly 6.8%. The company has more than doubled its dividend payout over the last five years. Iron Mountain expects to continue to increase its dividend by at least 4% annually for the next several years.
The company enjoys high customer retention rates and can therefore count on dependable cash flow. Iron Mountain should be able to grow revenue by expanding into emerging markets and into adjacent businesses. The company has already made significant acquisitions on these fronts, including buying a leading provider of art storage and U.S. operations of IO Data Centers.
Iron Mountain's acquisitions activity has added to its debt. The company's total debt now tops $8 billion. Some investors might worry that servicing this debt could affect Iron Mountain's commitment to its dividend. However, the company's management team said in the first-quarter earnings conference call that it feels good about plans to lower debt leverage over time and remains confident in being able to increase the dividend annually by the target 4% minimum.
Pfizer is one of the biggest of the big pharma companies, with a market cap of more than $210 billion. The company's products include prescription drugs, biosimilars, sterile injectables, and consumer healthcare products including Advil and Centrum.
Investors have long appreciated Pfizer's solid dividend. Its dividend currently yields north of 3.7%. Pfizer has hiked its dividend by nearly 42% over the last five years. The company's executives consistently prioritize the dividend program at the top of the list for capital allocation.
Pfizer's current product lineup includes several fast-growing blockbuster drugs, including anticoagulant Eliquis and cancer drug Ibrance, and autoimmune disease drug Xeljanz. Diabetes drug Steglatro, which Pfizer co-markets with Merck, should be another big winner for the company. In addition, Pfizer's pipeline includes 29 late-stage programs.
One negative for Pfizer is that its earnings growth has been weighed down in recent years by declining sales for drugs that have lost patent exclusivity and product shortages for its sterile injectables business. However, both issues should become lesser factors for Pfizer in the coming years.
I think Brookfield Infrastructure Partners, Iron Mountain, and Pfizer are great stocks to bolster the income of retirees who need more than just their Social Security checks. However, there are other good alternatives out there as well.
Brookfield, Iron Mountain, and Pfizer share common denominators that make them ideal for retirees. These commonalities include a high dividend yield, the financial ability to keep the dividends flowing, and strong businesses that should stand the test of time. Investing in these kinds of stocks over the long run should help provide investors with more security than Social Security can deliver on its own.
This article originally appeared on The Motley Fool.