Ah, retirement. The golden years. It's the time to be catching up on your reading, playing with your grandkids, maybe seeing the world a bit -- and definitely not a time to be worrying about whether your stock portfolio will crash.
To help you accomplish the former things and avoid the latter, I've put together a useful little stock screener (with some help from free stock screening website finviz.com). I've tasked it with seeking out four things that should appeal to retirees, and really anyone looking to own safe stocks:
- Reasonably large, established companies ($2 billion in market cap and up) with recognizable brand names.
- That pay a respectable dividend yield (at least 5%).
- That don't zig and zag with every wobble in the stock market (showing a "beta" of less than 1.0).
- That don't cost a lot -- at least 20% cheaper than the stock market's 25.6 P/E (price-to-earnings) ratio.
The following are three stocks that appear well-suited for investors in retirement. Go ahead -- read on and give them a look, and see if you agree.
Macy's (M 5.05%)
Everybody knows Macy's. It's one of the few big department stores still in business (as opposed to in bankruptcy). It's also not a half-bad stock to own -- as evidenced by last week's takeover rumors, which pushed the stock up.
When news broke that Canada's Hudson's Bay, owner of the Lord & Taylor and Saks Fifth Avenue department store chains, was interested in buying Macy's, the latter's shares soared nearly 12% in value over just two days' time. But with Macy's valued at a market capitalization nearly seven times as large as Hudson's Bay's, experts are saying an acquisition is unlikely to happen, because the acquirer lacks the resources to make it happen -- and Macy's shares are starting to settle down again as reality sets in for the company looking to make a turnaround.
Macy's shares sell for just 13.4 times earnings (roughly half the average P/E on the S&P 500) and pay a tidy 5.2% dividend yield. The stock also has a beta of just 0.75, indicating that when the stock market goes down, Macy's stock goes down a lot slower than everybody else. (Granted, Macy's also isn't as quick to zoom when the stock market is rising, but you can't have your cake and eat it, too). Still, with a stock price 35% below its 52-week high, there looks to be plenty of room for Macy's shares to grow, whatever the rest of the stock market does.
Sunoco (SUN 0.75%)
My second candidate is Sunoco. Shares of this wholesale and retail distributor of motor fuels (you've probably seen the gas stations) have moved up 11% since the year began, and tend to mirror the price of gasoline -- rising when oil prices rise, and falling when oil prices slide. In that regard, U.S. government forecasts for moderating oil prices in 2017 suggest only modest gains for Sunoco this year, while more bullish prognoses on Wall Street suggests things could work out very well for the stock. (The truth is, though, no one really knows where oil prices will go).
Sunoco stock is not quite as cheap as Macy's, selling for a P/E ratio of 19.9. But that price is still a whole lot cheaper than the average S&P 500 stock. Additionally, Sunoco pays a whopping 11.7% dividend yield, which is five times the average yield on the S&P. Meanwhile, with a beta of 0.62, Sunoco is even less shock-prone than Macy's -- allowing you to enjoy your sizable dividend checks in peace, without having to worry too much about the stock cratering.
National Grid (NGG 0.22%)
Of course, if it's steady dividend checks and smooth stock performance you're looking for, you can't go too far wrong investing in a utility stock -- and here, National Grid is one of the best. Priced at 17 times earnings and paying a 5.2% dividend yield, National Grid makes money selling natural gas and electricity to customers in the U.S. and U.K., two developed markets whose growing need for energy won't be going away any time soon. Little wonder, then, that National Grid boasts the lowest beta on our list today -- just 0.52.
In addition to the steady reliability of its business over the long term, National Grid also promises a more immediate payback for new buyers. As my fellow Fool Neha Chamaria has pointed out, National Grid is about to receive a $4.4 billion windfall upon selling a 61% stake in its U.K. natural gas distribution unit. While letting go of so much of its natural gas business may limit earnings (and dividends) growth in the future, there's also an upside here: After the sale closes, National Grid intends to use the cash it generates, plus other cash on hand, to fund $5 billion worth of share buybacks and "special dividends" to its shareholders -- perhaps as soon as late March.
Returns on investment don't get much more immediate than that.