Editors' Pick: Originally published March 23.
Inflation has been on the rise in 2016, leading investors -- especially those with near-term retirement plans -- to seek out the relative safety of investing in dividend stocks.
The three stocks outlined below are "dividend gems that can keep that income flow steady and comfortable, no matter how inflation moves," TheStreet contributor Siddhi Bajaj recently wrote. "With attractive yields, consistent dividend increases, strong competitive advantages and good growth potential, these three stocks are the kind of investments that typically find favor with Warren Buffett."
Below, TheStreet's in-house chartist, Bruce Kamich, takes a technical look at the three retirement income stock picks.
As stock market averages weakened early this year, the price of AT&T (T) rallied strongly above the rising 50-day and 200-day moving averages. The on-balance-volume line rose sharply, but a recent bearish divergence during March could mean that prices stall or even correct a bit. A shallow correction of less than 10% wouldn't hurt the trend.
In this longer-term view of AT&T, above, we can see the impressive strength in this stock as prices rallied over the highs of 2015 and 2014. The OBV line is positive, but it hasn't cleared its respective 2015 and 2014 highs. Prices are firmly above the rising 40-week moving average, with no bearish divergences on this time frame.
While holding stocks "long term" is a great goal, it may be hard to do in practice in a time when preservation of capital may be more important. Long positions in AT&T should re-examined if there is a decline of more than 10% from any high.
In this short-term chart of Archer Daniels Midland (ADM) , we can see that prices are recovering from a downtrend from May into February. Prices stayed below the declining 50-day and 200-day moving averages for much of the past 12 months, but ADM rallied above the 50-day average line in February. The OBV line is up strongly, telling us that buyers of ADM have been pretty aggressive in recent weeks.
This longer-term view of ADM, above, shows prices still below the declining 40-week moving average line. The OBV line is neutral on this timeframe, and we see no bullish divergences between the price action and the momentum study. Without a more robust longer-term chart, I would not be surprised if ADM retested the $35 level. This may be a better place to buy ADM.
This chart of Southern Co. (SO) is pretty positive, with prices above the rising 50-day and 200-day moving averages. The OBV line has been confirming the price strength, rising from a June low.
One clue to keep an eye on is the bearish divergence between the higher and higher price highs and the equal highs on the momentum study. A divergence is like a yellow traffic light -- it is an alert and may not be an automatic signal for action.
This chart of Southern gives us more history to consider. Prices are above the rising 40-week moving average line, which is positive. We could see Southern retest its highs in the $52-to-$53 area. The OBV line is pointed in the right direction, and there are no bearish divergences with momentum.
Retirees could remain positive on Southern, but they should protect longs if we see a retreat below support at $46.