The Social Security Administration estimates that the average 65-year-old can expect to live for about 20 more years. This figure is at an all-time high and continues to rise with each passing year, which is great news.
The only downside to living longer is that retirees will be dependent on their nest eggs to provide them with a steady form of income for a much longer period of time. That makes it all the more important for today's retirees to invest at least a portion of their portfolios in the stock market. In particular, these investors should be looking for companies with strong competitive advantages in place and a bright future ahead.
Knowing that, we asked a team of our Motley Fool contributors to share a stock they think is positioned well for long-term profit growth. Read below to see which stocks they selected.
Matt DiLallo: Passive income is the lifeblood of a comfortable retirement. For the lucky ones, that means having a generous pension that's supplemented by Social Security. Unfortunately, pensions are becoming a thing of the past, and Social Security's future is questionable at best. This problem is forcing many investors to look at other ways to boost their ability to collect passive income when they retire, with real estate typically topping the list. However, instead having to deal with the potential pitfalls of owning rental units, an easier way to invest in real estate is to buy units of Brookfield Property Partners (NASDAQ:BPY).
One could argue that Brookfield Property Partners is the only real-estate investment an investor will ever need. The company owns a diversified portfolio of premier real-estate assets across the globe, offering the average investor the opportunity to own a tiny piece of iconic properties they'd never be able to buy on their own. Currently, that includes 153 high-quality office properties and 128 best-in-class retail properties, as well as stakes in multifamily housing, hospitality, industrial, and self-storage portfolios.
These assets produce very stable cash flow, the bulk of which Brookfield Property Partners passes on to investors via a pretty lucrative distribution. That payout, which currently yields 4.6%, is expected to grow by 5% to 8% per year thanks to the embedded growth of Brookfield's portfolio due to development projects under way and increased occupancies and rents across its portfolio. On top of that, the company is a disciplined acquirer, which could lead to even higher distribution growth than forecast.
It's that growing income stream that makes Brookfield Property Partners such a great stock to buy with retirement in mind.
The bull case behind CVS Health is relatively straightforward. The country is aging, which means spending on healthcare is almost certainly going to rise. That bodes well for continued growth for retail pharmacy stores, and I think CVS Health is well positioned to benefit from the trend.
CVS Health is actually focused on saving the healthcare system money. It is doing so in a handful of different ways, but I'm particularly bullish on two of its rapidly growing businesses.
The first is the company's pharmacy benefits management business. This business makes up the lion's share of the company's revenue, and it helps health insurers, employers, governments, and other health-benefit program sponsors keep their pharmacy costs low. CVS Health does so by using its deep knowledge of the pharmaceutical space and huge buying power to negotiate deals directly with drug makers, and then pass along the savings to its customers. The company calculates that its clients have saved more than $6.4 billion over the past five years alone on pharmaceutical costs by employing CVS Health services.
Second, CVS Health is rapidly rolling out a network of in-store medical clinics -- called MinuteClinics -- that offer patients convenient access to basic medical care for a low fee. These clinics are a big hit with customers since they are open seven days a week and no appointment is necessary, but they also keep these patients out of their doctor's offices and the emergency room, which is a net cost savings to the system. The company has abut 1,100 MinuteClinics in operation right now, and new clinics are opening with each passing day.
In total, CVS Health has a great strategy in place to take advantage of a long-term trend, and it's also well protected from e-commerce threats. Considering all of that, I think CVS Health is exactly the kind of stock a retiree could learn to love. It also doesn't hurt that the company offers up a fast-growing dividend that is currently yielding about 1.8%.
Daniel Miller: Two factors that should be at the top of investors' lists when it comes to picking stocks for retirement should be value and dividend yield. One stock that's trading on the cheap, at a forward price-to-earnings of just 6 by Morningstar's estimates, and sports a juicy 4.5% dividend yield is Ford Motor Company (NYSE:F).
While many investors are hesitant to invest in automakers right now because of concerns about the North American automotive market peaking, the negativity seems fully priced in at these levels. Investors have to realize these high sales levels could plateau in the foreseeable future. The market plateauing at such a high level, in combination with strong sales of high-margin products such as SUVs, trucks, and luxury vehicles, means automakers will continue printing cash and posting record profits -- all good news for investors reaping the dividend rewards in the meantime.
Further, Ford has done an excellent job of producing its vehicle lineup on common platforms and consolidating its vehicle suppliers, which has improved the automaker's economies of scale and leverage. For instance, Ford expects 99% of its global production to come from only nine core platforms. That's down from 27 since 2007.
Investors probably aren't going to get mega rich from buying shares of Ford, and the company faces intense competition in a cyclical industry. But Ford is going to continue churning out profits thanks to its popular lineup of SUVs and trucks, and at such a cheap valuation and a 4.5% dividend yield, it's a great selection for retirees looking to generate income.
Brian Feroldi has no position in any stocks mentioned. Like this article? Follow him on Twitter, where he goes by the handle @Longtermmindset, or connect with him on LinkedIn to see more articles like this.
Daniel Miller owns shares of Ford. Matt DiLallo owns shares of Brookfield Property Partners and Ford. Matt DiLallo has the following options: long January 2018 $10 calls on Ford. The Motley Fool owns shares of and recommends Ford. The Motley Fool recommends CVS Health. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.