Retirees are living longer than ever, which means they will depend on their stock portfolios for income for an extended period of time. That's why we Fools believe that nearly every retiree should invest at least a portion of their nest egg in the stock market.
Of course, not every stock is a good choice for older investors. Retirees should favor rock-solid companies that offer up a compelling combination of growth, value, and income. If that sounds like a winning strategy to you, then I'd suggest that you give CVS Health (NYSE:CVS), Pfizer (NYSE:PFE), and Verizon Communications (NYSE:VZ) a closer look.
Lowering the cost of healthcare
Healthcare costs have been on the rise for years and show no signs of slowing down. That's why I think that any company that helps to keep the cost of healthcare low will thrive for the foreseeable future. If you agree, then CVS Health is a great stock to get to know.
CVS Health consists of two businesses in one. First, the company operates a vast retail pharmacy empire. These stores continue to thrive thanks in part to the huge success of the company's in-store MinuteClinics. These clinics offer basic healthcare services for a much lower price than a consumer would pay at the doctor's office or hospital, making it easily affordable to get care for minor healthcare issues.
Second, CVS Health also owns one of the largest pharmacy benefits management businesses in the country. This business acts as a middleman between institutions that offer health insurance -- think employers, governments, unions -- and drug companies. CVS Health uses its huge buying power to negotiate discounts on drug and then passes the savings along to its customers.
With 10,000 baby boomers retiring every day, demand for both of these businesses is likely to grow for years to come. Now that CVS Health is trading at a bargain price, I think it's a great time to get in.
A big pharma with a big payout
Pfizer's investors had to live through several years of declining sales in the wake of the company losing patent protection on its megablockbuster drug Lipitor in 2011. Thankfully, the worst of the carnage is now over, and Pfizer is firmly in growth mode again. In fact, newer drugs like the blood thinner Eliquis, the pneumococcal vaccine Prevnar 13, and the breast cancer drug Ibrance helped to grow the company's revenue by double digits on an operating basis last quarter. That's a solid number for a company of Pfizer's size.
Looking ahead, I think that investors can bank on growth staying strong as Pfizer currently counts 41 drug candidates in late-stage development. While not all of them will end up winners, the odds are good that at least a handful of them will work out. In addition, the recent acquisitions of Medivation and Hospira provide ample room for near-term growth opportunities.
Between acquisitions, its pipeline, and its newly launched drugs, Pfizer offers investors a great shot at long-term growth. Add in a dividend yield of nearly 4% and Pfizer looks like a bargain..
Connecting you to income
Most U.S. consumers carry a smartphone nowadays, and they all demand to be connected no matter where they travel. That fact keeps them very loyal to the largest wireless providers in the country, which is a big reason why Verizon's business has become so predictable. In fact, Verizon's churn rate last quarter was only 1.04%, which is telling about how loyal its customer are.
Of course, the wireless market in the U.S. is very mature, which means that investors shouldn't expect much growth from this segment. Thankfully, Verizon offers investors potential upside through its pending acquisition of Yahoo! and its exposure to the Internet of Things. With the upcoming rollout of 5G technology, Verizon stands a decent shot at moving its top line higher over time.
Investors don't have to pay up for the company's consistency or growth prospects, either. Verizon's price-to-earnings ratio is about 15 right now, which is quite a bit lower than the S&P 500 in general. That low valuation comes with a dividend yield of 4.4% as well.
With all this in mind, I believe Verizon is an ideal choice for retirees.