Retirees want investments that will protect and grow their nest egg while providing steady income that grows faster than the rate of inflation. The best dividend stocks match the needs of retired investors. Dividend stocks can also lead to early retirement.

Dividend growth investing is not without its risks, however. Some dividend stocks offer high risk as well as high yield. They can be appealing to retirees because of the high current income, but they are dangerous. The last thing you need in retirement is for your nest egg to get scrambled by chasing yield.

The best dividend stocks for retirees to invest in combine the following five characteristics:

  1. They have a high yield for current income.
  2. They trade at a fair so you don't overpay.
  3. The companies behind them have a strong competitive advantage, so your income stays safe.
  4. They have a long runway for reliable future growth so your income grows.
  5. They have a long record of dividend growth, showing that management cares about the dividend.

Finding great businesses like this is not easy. The stock examined in this article matches all the characteristics of a perfect retirement stock investment. Here's why:

  • It has a 3.3% dividend yield.
  • It trades at a price-to-earnings ratio of just 12.
  • It has paid increasing dividends for 41 consecutive years.

That stock is Archer Daniels Midland (ADM) .

Archer Daniels Midland is one of the largest agricultural businesses in the world. The company has a market cap of $21.4 billion.

The company is truly global. Archer-Daniels-Midland originates:

  • more than 15% of the global corn crop
  • more than 15% of the global wheat crop
  • more than 30% of the global soybean crop

Archer Daniels Midland is a Dividend Aristocrat thanks to its 41 consecutive years of dividend increases. The company's long dividend streak is evidence of a strong and durable competitive advantage.

Archer Daniels Midland's industry-leading size and long history give it an excellent distribution network. ADM's distribution network consists of the following:

  • 1,300 trailers (all owned)
  • 39 innovation centers (all owned)
  • 600 trucks (300 owned, 300 leased)
  • 41 ocean vessels (9 owned, 32 leased)
  • Around 2,600 barges (2,100 owned, 500 leased)
  • Around 250 warehouses and terminals (all owned)
  • 300 processing plants (281 owned, 19 leased)
  • 28,100 rail cars (13,500 owned, 14,600 leased)
  • 466 procurement facilities (413 owned, 53 leased)

The company's large global footprint gives it a strong and durable competitive advantage in crop origination and processing. A competitor would have to invest a tremendous amount of capital upfront to match Archer Daniels Midland's capabilities.

Retirement investors should look for businesses with strong and durable competitive advantages because they offer greater safety and stability than businesses more subject to the creative destruction of the market.

Archer Daniels Midland has had average compounded annual growth in earnings per share of 4.5% over the past decade. Dividends have grown on a compounded basis at a more robust 13.1% a year over the same period.

The company's 10-year dividend growth rate greatly understates its real earnings growth power. That's because Archer Daniels Midland is currently in a cyclical trough.

Archer Daniels Midland's earnings fluctuate based upon commodity prices and currency prices. The strong dollar and low oil prices have hurt the company's business, but only in the short run. This has reduced earnings.

The long-term growth prospects of Archer Daniels Midland remain bright. Rising global food consumption from growing populations is the company's long-term growth driver. As demand for food increases, Archer Daniels Midland will benefit.

The long-term growth driver of Archer Daniels Midland makes it a good fit for retirement accounts as the company's dividend income is likely to continue to rise over the long run.

Archer Daniels Midland's long-term growth numbers are strong. The company has had average compounded growth in EPS and dividends per share of 12% since 1999. The company should continue to see these numbers remain at at least 7% going forward. This growth, combined with the company's dividend yield, gives investors expected total returns of more than 10%.

The company is likely to do significantly better than that 7% number for EPS as it improves margins through cost-cutting plans and focusing on higher-margin businesses. Share repurchases will also help drive earnings growth on a per-share basis.

Investors do not like to see earnings fall -- even if it is a short-term occurrence. This has created an opportunity to buy Archer Daniels Midland stock for cheap. The company's low price-to-earnings ratio of 12 does not reflect Archer Daniels Midland's above-average total return prospects and safety.

The company is also trading for dividend yield highs not seen since the worst part of the Great Recession, in 2009. Right now presents a great buying opportunity in this stock for dividend investors.

The company's high yield, conservative payout ratio of 37.2%, safety, and solid total return prospects make it a favorite of The 8 Rules of Dividend Investing and a compelling choice for retirement investors.

This article is commentary by an independent contributor. At the time of publication, the author was long ADM.