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7 Stocks You Can Retire On

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When it comes to investing for your retirement, a lot has changed over the past few years. What hasn't changed, though, is that you still have to find stocks that will pull their weight in your portfolio and give you the growth you need to reach your financial goals.

Dealing with the lost decade
Over the past 10 years, people's attitudes about the stock market have done a complete U-turn. Back in early 2000, nearly everyone had seen their stocks go up for years, thanks to the great bull market of the late 1990s. Those who found great technology stocks like Dell early in their growth phases enjoyed some of the biggest paper gains. Even those who bought shares of more speculative companies that weren't as well-established saw their investments go up in value.

Ten years later, though, it's a whole different story. Investors have lived through two difficult bear markets in the past decade. Although the bull market in between pushed stocks to new highs, those who believed that the bursting of the tech bubble was a phenomenon that would happen only once in a lifetime found themselves sorely disappointed by this time last year.

Growth for all seasons
If you've let the lost decade get you discouraged, though, then you're not looking hard enough. The key lesson that many have learned from these difficult times is that successful investing requires more than simply buying stocks indiscriminately. You have to buy stocks in the right companies -- ones that have a well-built foundation of strong financial performance underlying their shares. Companies that can provide that sort of growth year in and year out, regardless of the overall financial condition of the economy, can bring big rewards to investors who find them early enough.

So where can you find stocks like those? Well, one thing that the recent financial crisis lets you do is see how companies have performed in both good times and bad.

From 2005 to 2007, companies that succeeded in seeing revenue and net income grow substantially during the bull market were a dime a dozen. You should have been disappointed not to see that sort of growth during a fairly strong economic expansion.

But you'll find the proof of the pudding is in how businesses fared during the recession. If they managed to survive the past two years without seeing their growth disappear, then they've cleared a huge hurdle -- and you can have more confidence in them.

To get a flavor for what sorts of stocks we're talking about, I looked for large-cap stocks that had posted revenue growth of at least 3% and net income growth of at least 5% in each of the past five years.

Stock

5-Year Average Growth Rate in Revenue

5-Year Average Growth Rate in Net Income

5-Year Average Annual Return

FLIR Systems (Nasdaq: FLIR  )

21.1%

30.7%

13.8%

CVS Caremark (NYSE: CVS  )

27.2%

31.2%

7.6%

Apple (Nasdaq: AAPL  )

32.8%

68.1%

37.7%

Dolby Labs (NYSE: DLB  )

20.0%

43.6%

15.7%*

Royal Gold (Nasdaq: RGLD  )

29.4%

31.7%

22.5%

L-3 Communications (NYSE: LLL  )

19.0%

21.3%

4.3%

Atwood Oceanics (NYSE: ATW  )

29.5%

101.3%

16.7%

Source: Capital IQ, a division of Standard and Poor's.
*Return since Feb. 17, 2005.

What surprised me the most about these stocks is that despite the relatively low annual thresholds in the screen, most of these stocks far surpassed those growth rates over the long run. Far from "slow but steady," these stocks are among the most exciting high-growth companies you can find right now.

What I didn't find surprising, though, was the way that these stocks have performed throughout the period. And even though some lost ground during the recent bear market, their businesses held up, helping longtime shareholders minimize their losses. That just goes to show that the best stocks have the best-performing businesses helping to power their success.

Go for growth
In order to retire rich, you'll need to find stocks that will get you there. If you've backed off from investing in fast-growing companies because you believe they're too risky, then you may be making exactly the wrong decision for your future success. By finding the right stocks, you'll greatly improve your chances of enjoying the kind of retirement you've always dreamed of.

Feeling good about your retirement prospects? Chuck Saletta warns that you might have a false sense of financial security.

Fool contributor Dan Caplinger wonders if Brett Favre is seriously thinking about retirement. He doubts it. We don't know about Brett, but Dan doesn't own shares of the companies mentioned in this article. Apple, Atwood Oceanics, and Dolby Laboratories are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy will never get put out to pasture.


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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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7/23/2014 4:00 PM
AAPL $97.19 Up +2.47 +2.61%
Apple CAPS Rating: ****
ATW $50.69 Down -0.11 -0.22%
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CVS $78.13 Up +0.26 +0.33%
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DLB $43.91 Up +0.35 +0.80%
Dolby Laboratories CAPS Rating: ****
FLIR $34.11 Down -0.11 -0.32%
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