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3 Stocks to Supplement Your Social Security Income

Most American retirees depend on Social Security for at least half their retirement income.  While it has been a reliable source of income for generations, Social Security's future looks a lot shakier. Even if you believe Social Security will be patched before it collapses, at its healthiest, the program replaces only around 40% of a typical retiree's income.

As a result, you'll want some way of supplementing your Social Security income. These three stocks all pay dividends, have increased their dividends in the past, and look capable of potentially continuing to increase their dividends in the future. That combination makes them great stocks to consider owning as a supplement to whatever Social Security income you may expect to receive.

Image source: Getty Images

The comfort-food company that treats its owners well

J.M. Smucker (NYSE: SJM) is practically synonymous with peanut butter and jelly sandwiches. To go along with its namesake Smucker's jams and jellies, it owns Jif peanut butter, and the bakers among us can even make their own bread for those PB&Js with Smucker's own White Lily flour. J.M. Smucker's reach also extends to your morning coffee, with brands such as Folgers and Dunkin' Donuts, and it even sells well-known pet foods such as Kibbles 'n' Bits and Meow Mix. 

Food may not be the fastest-growing industry out there, but it's one that always has some level of demand and reasonable prospects for the future. J.M. Smucker is expected to be able to increase its earnings by around 3.7% annualized over the next five years, which is higher than inflation has been trending in recent years. 

J.M. Smucker's stock currently pays a dividend of $0.75 per share per quarter, and if it keeps to its recent trends,  its next dividend announcement could potentially extend its streak of increases. With a payout ratio of around 58% of earnings, JM Smucker has room to continue increasing its dividend as its business grows over time. Given the company's expected growth rate, it would be surprising if its next increase is as generous as the nearly 12% dividend increase it handed investors last year, but any increase above inflation is a win in real terms.

An insurance giant that claims the strength of Gibraltar

The Rock of Gibraltar. Image source: Getty Images.

Prudential Financial (NYSE: PRU) has long used the Rock of Gibraltar as its corporate symbol, to attempt to reflect the strength and security it offers its customers.  Prudential Financial has been around for over 140 years,  but it has only been a publicly traded company since December 2001. In 2002, it initiated its dividend at $0.40 per year, and that payout has grown to the point where it currently sits at $0.75 per quarter, or $3.00 per year. 

While Prudential Financial has generally increased its dividend most years, it did prudently cut its dividend during the financial crisis to protect its vaunted long-term strength. Today's dividend is well above where it sat before that cut,  showcasing the company's commitment to restoring that payment once the storms subsided.

Despite that upwardly trending dividend over time, Prudential Financial currently pays out less than 30% of its income as a dividend to its shareholders. That gives it room to continue increasing its dividend as its business grows over time while still protecting the Gibraltar-like strength it's known for. Speaking of that growth, the company is expected to be able to increase its earnings by around 9.4% annualized over the next five years, giving it a strong chance of being able to continue its trend.

A healthcare titan with decades of dividends behind it

Image source: Getty Images.

Johnson & Johnson's (NYSE: JNJ) medical products range from Band-Aids  to the next generation of robotic surgery equipment. People are generally willing to spend to protect and attempt to restore their health no matter what the economy, and that fact has enabled Johnson & Johnson to pay increasingly higher dividends for 55 consecutive years. 

Johnson & Johnson's dividend currently sits at $0.84 per share per quarter, which represents a 5% increase from what the company paid in the same quarter last year. That dividend is around 54% of earnings, giving Johnson & Johnson room to continue increasing its payments in line with the growth of its underlying business.

Speaking of that potential growth, Johnson & Johnson is expected to increase its earnings on average at around 6.5% annually over the next five years. If it hits that pace, its dividend has the potential to grow a bit ahead of where inflation has been recently, providing some nice supplemental income and income growth to your Social Security benefit.

Get yourself the income Social Security won't provide

If you're looking for more in your retirement than the 40% of your income that Social Security might provide, investing in quality companies can be a key part of closing that gap. Businesses with a history of increasing their dividends and the potential to continue doing so can be a part of your strategy to get there.

J.M. Smucker, Prudential Financial, and Johnson & Johnson may not be the fastest-growing companies in the world. Still, they all have key characteristics that make them attractive to consider for investors looking for ways to supplement their Social Security incomes.

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Chuck Saletta owns shares of J.M. Smucker and Prudential Financial. The Motley Fool owns shares of and recommends Johnson & Johnson. The Motley Fool has a disclosure policy.