These Are the Last Great Retirement Income Stocks in America

You Cannot Eat a Share Buyback

It won’t cover the groceries, the gas, or a plane ticket to your granddaughter’s birthday.

When I show people that chart, the first thing they say is some version of: well, business must be worse than it used to be.

It isn’t. Not remotely. S&P 500 dividend payouts set a record in 2024 for the fourteenth consecutive year — roughly $670 billion, about $1.8 billion in cash every single day.

So why is the yield lower than at any point in a century and a half, bar a handful of months?

Partly honest arithmetic: prices ran faster than payouts. But the bigger reason is that the share of profits companies choose to hand their owners has fallen. Payout ratios have slid to around 34%, against a historical norm closer to 42%.

The rest goes to buybacks. In 2024, a record $942 billion of them.

I want to be fair here, because I don’t think this is villainy. Buybacks can be a perfectly sound use of money. Between 1982 and 2011, the quarter of the S&P 500 with the heaviest repurchase activity returned 13.19% annually against 10.96% for the index. When a good business buys its own stock below what it’s worth, every remaining owner gets a little richer.

So no, buybacks aren’t a scam. I’m telling you something simpler, and much harder to argue with.

You cannot eat a share buyback.

Think of it as an orchard. A dividend is the fruit — it arrives every season, you take what you need, and the trees are still standing when you’re done. A buyback makes the orchard itself more valuable. Fewer trees, better trees, a higher price per acre. That’s genuinely good, right up until the moment you actually need money — because the only way to convert it into something you can spend is to sell part of the orchard.

Do it once and it’s fine. Do it every year for twenty years of retirement, and you have spent two decades cutting down the apple tree to pay the mortgage on the apple farm.

The Income Didn’t Leave the Market. It Left the Index.

Sixty-three out of five hundred is the whole problem. It is also the whole opportunity — because the S&P 500 is not the market.

First, what that count costs an ordinary person. Take a retiree with $500,000 set aside — a lifetime of saving, and a perfectly ordinary sum for someone who did everything they were told to do.

But the S&P 500 is not “the market.” It’s five hundred of the largest companies in one country, weighted heavily toward the handful that have most enthusiastically decided you don’t need the cash.

Step outside it and the picture changes completely. There are businesses paying six and seven percent that have raised their distributions through every downturn of the past two decades. Companies that pay every month instead of every three. Partnerships whose entire purpose is moving cash to their owners. An entire class of security that sits ahead of common stock in line for payment — a market I’ll come back to another day.

So why is it still there? Why hasn’t it been picked over?

I’ll be straight with you, because this is the honest catch. When you step outside the index, you take on work. These companies are less followed. Fewer analysts cover them — some have none at all. They don’t get talked about on television, and a few have structures that take real effort to understand.

Those yields still exist precisely because nobody is looking. An opportunity everyone can see, requiring no work to find, does not stay a 7% yield for very long.

Somebody has to pull the filings, read the footnotes, check whether the distribution is actually covered by cash flow or quietly funded by debt, and find out what happened to that payout the last three times the economy turned. For nineteen years, that somebody has been me.

We Sold Part of Four Winners Last Year. We Still Own All Four.

And underneath that, the exit record — including the ones that lost money.

On a single day last September I took money off four positions we had held for years. Not exits — trims. I sold a portion of each and kept the rest.

We still hold every one of those four. They are still in the portfolio, still paying, and still rated a buy. That is what taking profits is supposed to look like when the business underneath is doing nothing wrong: you bank some of it, and you stay an owner.

I am spelling out that they were trims rather than exits because plenty of letters would have counted those four as closed positions and told you their win rate was 87%. Here is the number without them.

Of the last fifteen positions I sold out of completely, eleven finished at a gain.

Widen it to everything fully exited in the past three years and the ratio holds: nineteen of twenty-six. Both counts are as of September 2026, and both move every time a position closes.

Now the other side of the ledger, because a track record without its failures isn’t a track record. Four of those last fifteen lost money. Whirlpool didn’t perform the way I expected and was jettisoned at a loss of 48.9% — nearly half our stake. LyondellBasell went out at 43.3% down. ManpowerGroup cost us 20.9% and Apple Hospitality 16.7%. Go back further and you’ll find VF Corp, another disappointment that stuck with me long after I hit the sell button.

Widen the lens once more, to everything I have sold out of completely since the start of 2020. That is six years, and they include the pandemic crash, when I cleaned out nearly twenty holdings in a single year, and the 2022 bear market. Across that stretch, 54 of 80 positions finished at a gain, five of them with triple-digit returns. Two in three. Not every year looked like that, and I am not going to pretend the next three will average what the last six did.

But the record I’m proudest of isn’t the exits. It’s what we haven’t sold.

Today the portfolio holds 56 income positions at an average yield of 6.0% — the typical holding pays 5.9%. Either way, more than five times what the index pays. Forty-five of the fifty-six yield 4% or better.

What You Won’t Get From Me

I’d rather lose you on this page than have you join and find out in March.

This is not a trading service.

No options, no leverage, nothing with an expiry date, no positions you have to watch during the day. In a normal year this portfolio changes very little, and that is the product rather than a shortcoming of it. Every trade costs you something in spreads and taxes. Doing fewer of them is a feature I charge for.

It will not keep up with the market in a roaring bull run.

It isn’t built to. A portfolio assembled around companies that hand you cash every quarter will lag a market being carried by companies that hand you none. If what you want is the maximum possible number at the end of thirty years, buy an index fund and stop reading. What you get here instead is money arriving while you wait.

It is not protection against a crash.

I want to be blunt, because our industry is dishonest about this constantly. High-yield securities are not a hiding place. In March 2020 several of the things I own fell further than the S&P 500, and the portfolio dropped below $80,000. What a dividend does in a downturn is keep paying you while the price is down — and it does one more thing, which is hand you cash to spend when everyone else is selling. That spring I added twelve positions between March and May, and all twelve finished 2020 in the green. The portfolio ended that year up about 4%, against 1.2% for the Russell 1000 Value Index, and closed at $124,700 — a 55% rebound from the March low. In 2021 it grew to $160,600, up 28.8% and ahead of the S&P 500. Then came the real test. In 2022 the S&P 500 fell nearly 20%, the Nasdaq 32%, and bonds had one of their worst years on record. This portfolio slipped about 2%. That is not protection, and I won’t call it that. It is what a portfolio built to keep paying does in a bad year, and it is the part of the record I’d show a nervous investor first.

We have losing positions, and I don’t hide them.

Four of the last fifteen positions we sold out of completely lost money — one of them nearly half. Since the start of 2020, 54 of 80 have finished ahead, and the 26 that didn’t are in the same table as the winners. You will see losers in your own account eventually.

And nothing here is a guarantee.

Dividends are declared by boards of directors, one quarter at a time, and boards cut them. What I can promise is the five-point screen you just read about, run on every holding, and an alert the moment one of them stops clearing it.

Closed-position counts are full exits only, as of 15 September 2026, and move whenever a position closes. Portfolio values are the High-Yield Investing model portfolio as reported in the letter’s year-end issues of 18 December 2020, 21 December 2021 and 20 December 2022. Past performance is not a guarantee of future results.

“I’m Already Retired. Haven’t I Run Out of Time for This?”

It is the question I get most often, and the honest answer is better than people expect.

I understand where it comes from. I have spent this whole letter talking about 2007, about doors that closed nineteen years ago, about what a cost basis becomes after two decades of raises. If you are sixty-eight, that can read as a story about somebody else’s good fortune.

So let me take the argument apart.

A yield pays you in year one. If you buy something today at 7.8%, it pays you 7.8% this year. Not in year thirty — this year, in cash, into your account. The compounding I have been describing is what happens on top of that if you hold. It is the bonus, not the premise. Nobody has to wait two decades for the money to start arriving.

The raises start immediately too. A company that lifts its distribution 5% a year lifts yours 5% a year from the first one. Five years of that turns 7.8% on your money into roughly 10%. Five years is not a young person’s timeframe.

And this is the part people miss: a retiree is the person this suits best, not worst. You are the one who actually needs cash arriving on a schedule rather than a number on a screen you would have to sell into to spend. Everything in this letter about not cutting down the orchard is written for somebody who is living off the orchard right now.

The reader with thirty years ahead of them gets more out of the compounding. The reader who needs to eat this year gets more out of the income. The first group can afford to wait. The second cannot, which is exactly why they should not be holding things that pay them 1%.

A Full Year Is $49

It normally runs $129. Here’s why I’d rather have you as a reader than have your money.

Given that a single one of these recommendations could reasonably add tens of thousands of dollars of income over the years you hold it, I could justify asking $1,000 for access. That’s not what I want this to be. The whole point — the reason I left the private client business — was to put this research in front of people who’d actually use it. That only works if the price isn’t the obstacle.

Let me price it the way you’ve been thinking all letter. At our portfolio’s 6.0% average yield, $49 is roughly the annual income thrown off by about $850 of capital.