Do you have dreams of retiring early? If you employ some planning and financial discipline, it is possible. No matter your age, there’s no better time than today to begin saving and building up your investment accounts for that long-term goal.
To retire early, you’ll need to consistently add to your investments in a diverse mix of stocks. Dividend stocks are a good source of passive income that will help support you in retirement. And three that you should consider buying today are ExxonMobil (XOM 3.45%), Chevron (CVX 1.89%), and Lockheed Martin (LMT -0.20%).
ExxonMobil operates in the oil and natural gas business, and has an impressive record of raising its dividend annually for 40 consecutive years. It accomplished that feat thanks to its balanced business model, which gives it stability no matter what energy prices do.
Its upstream exploration and production business benefits directly from higher crude oil prices. Last year, that part of the company earned $36.5 billion, a 131% increase from the prior year, thanks to higher oil and natural gas prices. But the upstream business depends on market conditions. If this were ExxonMobil’s only source of revenue, it never would’ve achieved its impressive dividend streak.
That’s where its downstream business — refining oil and operating petrochemical plants — comes in. Those businesses benefit from lower oil prices because that gives them lower input costs. This downstream business provides a steady source of cash flow that provides stability amid swinging oil and natural gas prices.
In 2022, ExxonMobil raked in profits of $55.7 billion while its free cash flow — cash it can use to pay down debt, reward shareholders, or reinvest in the business — was $62.1 billion. It’s used that cash flow in part to reduce its debt burden — which peaked in 2020 at $66 billion — by 32% last year. It also returned more than $30 billion to shareholders through dividends and stock repurchases.
It also plans to invest $17 billion over the next five years into lowering carbon emissions. Almost 40% of these funds will go toward helping other companies to build lower-emissions businesses via the use of carbon capture and storage, biofuels, and hydrogen. It recently inked a deal with hydrogen and nitrogen products giant CF Industries to capture and store 2 million metric tons of carbon dioxide per year from that company’s manufacturing complex in Louisiana. This is just one deal of many in a carbon capture and storage market that is expected to grow to $4 trillion by 2050.
ExxonMobil has a balanced business model and a long history of dividend growth, and its 3.65% yield makes it a solid dividend stock worth buying now.
Chevron shares many similarities with ExxonMobil, including a balanced business model that includes upstream and downstream operations. Chevron also has an impressive dividend-hiking streak — 37 consecutive years.
Last year the oil and natural gas company raked in $35.5 billion in net income, an increase of 127% driven by strong growth in its upstream operations. It used these funds to raise its dividend by 6%, paying out $11 billion in dividends. It also returned another $11.25 billion to shareholders through stock repurchases.
Chevron is capitalizing on lower-carbon energy, too, by increasing its renewable fuel production capacity. Last year, it acquired Renewable Energy Group for $3.15 billion, making it the second-largest biofuel and renewable fuels producer in the U.S. It has also formed a joint venture with Bunge, investing $600 million to develop feedstock to produce renewable fuels, aiming to double their combined capacity by 2024.
Chevron sports a solid 3.96% dividend yield, making it another attractive investment for your early retirement portfolio.
3. Lockheed Martin
Lockheed Martin is the world’s largest defense contractor by sales, with 73% of its net sales coming from U.S. government contracts.
Because defense spending isn’t optional for national governments, Lockheed Martin has a reliable earnings base locked in through long-term contracts. Its stable earnings base is one reason it has been able to increase its dividend payouts annually for 20 consecutive years. Not only that, but the U.S. spends more on defense by far than any other country, and recently passed a budget allocating $858 billion to defense for 2023.
Lockheed Martin has solid long-term prospects. For one, the Department of Defense will acquire 2,500 of its F-35 aircraft for $400 billion and spend another $1.27 trillion operating and sustaining them over the fighter’s 66-year life cycle. Additionally, its High Mobility Artillery Rocket System (HIMARS) was arguably its most popular defense product in the past year. With the war between Ukraine and Russian ongoing, countries including Australia, Estonia, Lithuania, Netherlands, and Poland have purchased HIMARS systems, producing over $12 billion in revenue for Lockheed Martin.
Lockheed Martin is a top defense contractor, and the geopolitical tensions across the globe, along with its 2.58% dividend yield, make it an appealing dividend stock to add to your diversified portfolio today.