Want an Above-Average Retirement? Check Out These 3 Boring Stocks

The average stock in the S&P 500 has delivered a 7.7% average annual total return over the last 50 years. There's nothing wrong with being average. If someone starts investing $250 a month right after graduating college, they will become a millionaire by the time they retire at 65.

However, you could have an above-average retirement by investing in stocks that produce higher total returns. You also don't have to take on a lot of risk to earn a higher return. Boring stocks like water utility American Water Works (AWK -0.63%), infrastructure operator Brookfield Infrastructure (BIPC -1.04%) (BIP -0.80%), and commercial real estate owner Realty Income (O -0.17%) have produced above-average total returns over the years.

While their business models are real yawners, the trio is in an excellent position to continue delivering strong returns in the future. That could enable their investors to enjoy a better retirement.

The cash flow to grow

American Water Works is the country's largest regulated water and wastewater utility. It serves 14 million customers across 14 states and 18 military installations. While water utilities are incredibly boring businesses, they generate very predictable cash flow as customers pay their water bills.

The water utility returns 55%-60% of its steady cash flow to investors through its dividend (currently yielding 2.2%). It retains the rest of its cash flow to help fund its continued growth. It expects to invest $34 billion-$38 billion over the next decade to expand its regulated systems and acquire regulated water utilities.

Those investments should grow its earnings per share by around 7% to 9% annually. The utility anticipates growing its dividend at around that same rate. That sets the stage for the company to deliver 9%-11% average annual total returns in the coming years. That's not bad for a boring water utility.

The power to produce double-digit total returns

Brookfield Infrastructure is one of the world's largest owners and operators of critical global infrastructure networks. It owns a portfolio of boring assets, including electric utilities, toll roads, pipelines, ports, and cell towers. While those are extremely bland businesses, they generate very predictable cash flow backed by government-regulated rate structures and long-term contracts.

The company aims to distribute 60%-70% of its steady cash flow to investors via a dividend currently yielding 4.4%. It retains the rest to help fund expansion projects. Brookfield ended last year with about $6.7 billion of projects it expects to fund over the next two to three years. The most notable project is its investment to help finance the construction of two semiconductor manufacturing plants with Intel.

Brookfield estimates that reinvesting its retained cash flow into those projects will grow its funds from operations by 2%-3% per year. On top of that, the company should get a 3%-4% annual cash-flow boost from inflation-linked rate increases in its contracts and another 1%-2% bump from volume growth as the global economy expands. That sets it up to organically grow its cash flow by 6%-9% per year, supporting its plan to increase its dividend by 5%-9% annually.

Brookfield also routinely sells mature assets and recycles that capital into higher-return opportunities. This strategy has helped boost its growth rate to more than 10% annually over the past decade, a pace it expects to maintain for at least the next few years. Add its high-yielding dividend, and Brookfield could produce total annual returns in the low teens.

A balance of income and growth

Realty Income is a real estate investment trust (REIT). While real estate can be an exciting investment, Realty Income invests in boring, single-tenant, net lease properties. Most of its portfolio comprises retail properties (grocery, convenience, dollar, and drugstores) or industrial buildings (warehouses). The company's net leases provide it with a remarkably stable rental income that increases each year (either at a fixed rate or one linked to inflation).

The REIT pays out about 75% of its cash flow to investors each month in dividends (currently yielding 5.3%). It retains the rest to help fund new income-generating property investments. Realty Income anticipates that both rent growth and property acquisitions will increase its cash flow per share by 4%-5% annually.

That should enable it to continue increasing its dividend (something it has done 123 times since its public market listing in 1994). With that payout already yielding more than 5% and its earnings expected to rise by up to 5% each year, Realty Income's total return should approach 10% annually.

There is nothing average about their total return potential

American Water Works, Brookfield Infrastructure, and Realty Income have boring business models that generate very stable cash flow. However, that gives them the funds to pay attractive dividends and grow their businesses. That combination sets this trio up to produce above-average total returns in the coming years. It makes them great stocks to buy for those seeking a better-than-average retirement.