5 Stocks to Secure Your Financial Future

Unfortunately, as we all witnessed in 2008, the market can take even the safest-seeming portfolio and drastically reshape it in a matter of days.

But the worst part about the recent recession is that it's causing investors do the exact opposite of what they should be doing, and it could end up costing you the comfortable retirement you've always dreamed of.

The unfortunate reality
According to a 2009 survey, about 50% of retirees feel less financially secure than they did when they entered retirement. Among other things, they're worried about the economy, inflation, a change in housing prices, and their ability to recover from the economic downturn.

So what has the response been from baby boomers, who are entering retirement now? They're flocking to safety, which usually means shifting assets from stocks to bonds or keeping equity positions relatively conservative.

But even though investors in or close to retirement should shift some of their assets to more conservative positions, that doesn't mean they should eschew the better returns they could get elsewhere in the market.

A small caveat
Now, I'm not talking about going out and buying shares of First Solar (Nasdaq: FSLR  ) or Sirius XM Radio (Nasdaq: SIRI  ) , both of which operate in uncertain industries.

Don't get me wrong: First Solar is a great company. It has a clean balance sheet and is an aggressive cost competitor. But solar is a heavily subsidized market, and if I were near retirement, I wouldn't want my money tied up in an industry that may take years to materialize.

And while Sirius XM is a great turnaround story, it trades for 55 times next-year earnings and is heavily dependent on the recovery of the auto industry. Sure, there's room for growth, but Sirius's present price tag may be a bit too rich for the potential reward.

These companies and others like them are extremely volatile. And while volatility and risk aren't always the same thing, they aren't the best place for your money if you have a shorter time horizon.

The best stocks for you
If you're close to retirement, your investing philosophy should revolve around the following features:

  • Hefty dividends: If you're like most people, you probably need incoming revenue to help pay for day-to-day expenses. Fortunately, even after 2008, there are still plenty of stocks that pay you nicely to hold shares of their companies. The best ones grow their dividends regularly -- giving you a hedge against inflation.
  • Attractive valuations: You never want to pay more for a stock than you have to, and that's even more true with a shorter time horizon. Stocks with lower valuations give you a larger margin of safety and help ensure you're getting the best deal possible.
  • Earnings Growth: Many investors think that if you buy dividend stocks, you have to sacrifice your shot at gaining capital appreciation as well. However, that's definitely not true -- you should always buy companies that can provide growth as well as income.
  • Low Volatility: Stocks that swing up and down like a see-saw can give us motion sickness. With less time to play around with, buying stocks with low volatility, or beta, will let you sleep better at night.

So what are the top five stocks to buy today, that encompass the above criteria? Let's take a look:

Stock

Dividend
Yield

Price-to-Earnings
Ratio

20-Year Growth
Rate*

Beta

Eli Lilly & Co. (NYSE: LLY  )

5.8%

8.8

6.1%

0.80

Altria Group (NYSE: MO  )

6.5%

13.1

15.2%

0.34

Johnson & Johnson (NYSE: JNJ  )

3.4%

13.4

13.4%

0.57

Unilever (NYSE: UL  )

3.8%

17.7

10.7%

0.56

General Mills (NYSE: GIS  )

2.6%

15.0

11.6%

0.27

*Compound Annual Growth Rate.

Each of these companies trade for reasonable valuations, will pay you to hold them over the long-haul, and won't gyrate wildly -- so you can rest assured your portfolio won't be turned upside down. Even better, they've proven that they can offer capital appreciation as well.

The foolish bottom line
You should always have some of your capital allocated to fixed income and cash; but having all your money in near risk-free investments just won't cut it, especially as we experience some of the lowest interest rates in years. The combination above of current income, potential dividend increases, growth, and low volatility is one that should weather any storm.

That's why at Motley Fool Income Investor our analysts look for stocks just like the ones above. Our team knows that there are plenty of stocks that combine the best of both worlds -- both income and growth -- and that it only takes patience, due diligence, and some hard work to find them. And since 2003, their attentiveness to the market has paid off -- they're currently beating the S&P 500 by six percentage points.

If you're interested in seeing all of Income Investor's past and present recommendations, in addition to the five stocks you should "buy first," we're currently offering a free, 30-day trial. Just click here for more information -- no strings attached.

Fool contributor Jordan DiPietro owns shares of First Solar. First Solar is a Motley Fool Rule Breakersselection. Unilever is a Motley Fool Global Gains recommendation. Johnson & Johnson and Unilever are Motley Fool Income Investor choices. Motley Fool Options has recommended a buy calls position on Johnson & Johnson.. The Fool's disclosure policy is back on its feet after its second bear market.


Read/Post Comments (10) | Recommend This Article (59)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 20, 2010, at 7:52 PM, paulbverizonnet8 wrote:

    . Sure wish the insiders would start buying over there at Sirius Satellite Company.

  • Report this Comment On May 20, 2010, at 7:53 PM, paulbverizonnet8 wrote:

    .

  • Report this Comment On May 20, 2010, at 9:20 PM, doubting wrote:

    Jordan,

    You mention in your post sirius xm two times. In both occasions your statements are blatant lies. To say about a company with 19M subscribers that it trades in an "uncertain industry" is also an insult to its subscribers and shareholders. I am afraid that your statement relates nowadays more to your profession of uncertain writers with uncertain qualifications. Niether is truthful your proclamation that "it trades for 55 times next-year earnings". First, we simple folks, unlike you genius with the crystal ball, do not know what next year's earning will be. Second, even if we take this year's conservative estimate of 575M EBIDTA, it will be about 12 times in today's market for diluted shares. I would suggest that you do your due diligence in order not to come across as an outright liar misinforming common folks. I would love to see your rebuttal.

  • Report this Comment On May 20, 2010, at 11:13 PM, VietnamVet1 wrote:

    Sirius is a "dead man walking." That's why the shareholders are so touchy.

  • Report this Comment On May 21, 2010, at 6:02 AM, thidmark wrote:

    Is there a loonier group of people than the SIRI cheerleaders?

  • Report this Comment On May 21, 2010, at 10:17 AM, StarWitchDoctor wrote:

    vvet, carefull, honesty can hurt.

    regards.

    881500

  • Report this Comment On May 21, 2010, at 2:39 PM, moneyadvisors wrote:

    General Mills is the one I would go for as their is a great shortage food now and will be in the future, I would like to invest in it so that I can have a piece of this pie. Food industry anywhere is flourishing because of growing population and scarcity of food. I hope not but still "FOOD" would be an expensive commodity in future if we don't manage this situation well.

    For investment purposes, food industry is my choice.

    Regards,

    Ann Julie.

    Part of Money Management Directory http://www.moneymanagementdir.com/

  • Report this Comment On May 28, 2010, at 1:13 PM, pkrishna wrote:

    How cheap/cheesy can Motley Fool get?

    There is a "Click here to get instant access to this FREE report", on this page.

    I clicked. It took me a page asking for my email address. I entered.

    That took me to a page asking for my investor profile "so they can better serve me". I entered the info.

    That took me to a page asking me to choose from among a ten investment advisory newsletters. I checked "No" on all of them.

    That took me to a site asking me to "Sign up RISK-FREE now!" to a Motley Fool Stock Advisor

    This is INSANT ACCESS?

    There is no requirement for Motley Fool to dispense free advice. They can charge as much as they can get away with it. But they can be upfront about it, instead of resorting to lies and gimmicks.

  • Report this Comment On May 28, 2010, at 2:35 PM, cptech wrote:

    Pkrishna is absolutely correct! Have you top fools, editors etc. ever tried to 'click' through the maze of pages, questions and sales gimmicks?? I love the Fool, and participate often, but time is of an essence and besides the above, some of you are Extremely L O N G ... winded! I know you're out to make a buck ... but give us a break!! I'm not exactly a speed reader, so please keep it shot and to the point!!

    Thanks!

  • Report this Comment On May 29, 2010, at 7:36 PM, philkek wrote:

    M.F, Thanks for tips on these 5 dividend stocks. Better Business Bureau suggests you investigate BEFORE you invest. I prefer dividend stocks but I must do my own research before I invest. I once doubled my money on dividend stocks and dividend funds in 4 years. It felt good. That was then, this is now. Must do required homework first cause if you snooze, you lose. Fool on. Cheers.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1188615, ~/Articles/ArticleHandler.aspx, 12/22/2014 12:18:32 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement