As retirement draws closer, many investors begin to shift their portfolio toward companies that offer stability. These investors place an emphasis on buying companies with strong competitive advantages, solid long-term growth prospects, and a history of paying a juicy dividend.
Knowing that, we asked a team of our Motley Fool contributors to highlight a stock that they think is a great choice for any investors nearing retirement age. Read on to see which stocks they selected, and judge for yourself if you agree with their assessment.
Todd Campbell: If you're prepping your portfolio for retirement, you might want to consider stashing away shares in Microsoft (MSFT 0.37%). Until recently, the company was a Goliath in a declining industry, but thanks to new leadership, it's orchestrating a remarkable turnaround that should provide it with plenty of income-generating potential down the road.
Since installing CEO Satya Nadella at the helm in February 2014, Microsoft has been shifting its business increasingly online. By moving to a platform-agnostic cloud strategy, the company is diversifying itself away from the PC into a marketplace that should provide considerable margin advantages.
The company's strategy already appears to be paying off. Last quarter, sales of its various cloud-based consumer and commercial products clocked in at an annualized pace of $10 billion.
That's a great start, but more growth is coming. Nadella thinks Microsoft's cloud business could be hauling in $20 billion by 2018.
Since Microsoft already has a bulletproof balance sheet that includes over $105 billion (yes, billion) in cash and short-term investments and opportunities ahead of it appear rosy, this is one stock that I think can be a core holding for years to come.
Brian Feroldi: Pharmacy retail giant CVS Health (CVS -1.07%) is a terrific choice for investors nearing or in retirement. The company holds a strong position in an important growth market and has a slew of growth drivers in place that should allow it to thrive over time.
CVS's retail empire got a major shot in the arm last year when the company acquired Target's pharmacy and clinic business for $1.9 billion. The move singlehandedly increased CVS Health's footprint by more than 20% and gives the company a great outlet for attracting new customers into its network.
The company's stores are also benefiting from the rollout of its in-store MinuteClinics. Customers are responding positively to these clinics that offer basic healthcare services in convenient locations, and for a fraction of the cost of hospitals or doctors' offices. As CVS Health adds more of these clinics to its existing stores, it should help drive additional foot traffic.
Image source: CVS Health.
Beyond its stores, the company's pharmacy-benefit manager business also looks poised for growth. CVS Health uses its extraordinary bargaining power to negotiate lower drug prices from manufacturers and then helps to pass on those cost savings to other businesses for a fee. Revenue from this segment grew by more than 20% last quarter, and the business line boasts a customer retention rate north of 97%.
With the company's two main business lines poised for dependable growth, CVS Health can focus its financial might on taking care of shareholders. In this year alone, the company is planning on repurchasing about $4 billion worth of its stock, and it also pays out a fast-growing dividend that currently yields 1.6%.
Jason Hall: Athletic apparel, footwear, and accessories maker Under Armour Inc. (UAA) (UA -0.15%) may not sound like an ideal stock to buy for retirement, but if you're a decade or more away from retiring, I can think of fewer investments out there with better growth.
When the company last reported earnings, revenue was up 30%, operating income increased 26%, and earnings per share soared 33%. The thing is, this wasn't an aberration: Under Armour has grow sales by at least 20% for 24 consecutive quarters. That's six straight years.
But what matters to investors today is that Under Armour's best growth days could very well still be ahead of it. Two numbers should put it in perspective: $264.2 million and $149.3 million.
Image source: Under Armour.
Those are the company's footwear segment and total international revenues last quarter. That made footwear 26% of total revenue, and sales outside North America worth only 15% of sales. Last quarter, Nike Inc. scored more than half its revenue outside North America, and about 60% of sales were footwear. Oh, and Nike's revenue last quarter -- $8 billion.
Yes, Under Armour stock is very pricey by almost every valuation metric you can find. But it's a rare opportunity to buy a powerful brand with such massive growth opportunity, still so early in the story. If you're looking for a stock you can buy now and hold for decades to come in your retirement account, Under Armour deserves to be on your short list.
Cory Renauer: I'm several decades away from my intended retirement age of 70, but don't intend to work as hard in my late 60s as I do today. This is why Johnson & Johnson (JNJ -0.69%) is a core holding in my portfolio.
Image source: Johnson & Johnson.
It recently raised its quarterly dividend from $0.75 to $0.80 per share. At recent prices, the forward yield of 2.85% is well above the average dividend-paying stock in the S&P 500, and I expect it to continue growing into my retirement, and long after my children inherit the shares.
The latest bump marks its 54th consecutive annual increase. The annualized dividend of $3.20 is less than 58% of trailing-12-month profits, giving the company plenty of room to keep those increases coming, even if earnings tread water or fall in the years ahead.
I hardly expect this to be the case. J&J stock has handily outpaced the broad market over the past 20 years and is well positioned to continue doing so. Its combination of high-margin consumer goods and a dominant presence in medical devices alone position the company for long-term growth.
The most exciting segment at J&J, however is its first-rate pharmaceutical division. For example its first type-2 diabetes pill, Invokana, which allows excess blood sugar exit the body through the urinary tract, has huge potential.
At least 26 million Americans have type-2 diabetes. First approved in 2013, Invokana has already gained a significant share of this growing space despite dozens of competing products. A few years after its launch, already 12% of all type-2 diabetes prescriptions written by U.S. endocrinologists are for Invokana, pushing first-quarter global sales of the drug up nearly 17% to an annualized run rate of $1.3 billion.
Invokana's just one of several potential blockbuster drugs J&J has launched over the past few years already growing at a double-digit pace, which is why smart, retirement-minded investors keep buying this perennial favorite.
