Ah, retirement. The golden years. This is the time to be catching up on your reading, playing with your grandkids, maybe seeing the world a bit -- but 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, we've put together a useful little stock screener (with some help from our friends at free stock screening website finviz.com). We've tasked it with seeking out four things that should appeal to retirees -- and really, anyone looking to own a safe stock:
- Reasonably large, established companies ($2 billion in market cap and up) with recognizable brand names,
- that pay a respectable dividend (at least 4%),
- that don't zig and zag with every wobble in the stock market (as suggested by a beta of less than 1.0),
- and last but not least, that don't cost a lot -- at least 20% cheaper than the stock market's average 26.5 price-to-earnings (PE) ratio.
The following are three stocks that appear well suited for investors in retirement. Read on and see if you agree.
Despite the ambiguous name, you're probably more familiar with L Brands (BBWI -3.10%) than you know -- it's the company formerly known as Limited Brands (i.e., the one that used to own The Limited apparel chain). L Brands doesn't own The Limited anymore (hence the name change), and that's a good thing, seeing as all The Limited stores closed for good earlier this year. What it does own is arguably much better: Victoria's Secret and Bath & Body Works.
Temporary weakness in these two store chains (sales up only 2% last quarter, and profits down nearly 1%) has L Brands shares selling for a bargain price of just 12.6 times earnings (roughly half the average P/E on the S&P 500). L Brands stock also pays a hefty 4.8% dividend yield, which is more than twice the average yield on the S&P.
And if the low price and high dividend weren't enough to sway you, L Brands stock also has a beta of just 0.68, indicating that when the stock market goes down, L Brands stock goes down a lot slower than everybody else. On the flip side, with a stock price 42% below its 52-week high, there looks to be plenty of room for L Brands shares to go up once business turns back around.
Our second candidate for stocks a retiree might want to own is electric utility Southern Company (SO -0.06%). Valuation-wise, it's not quite as cheap as L Brands, selling for a P/E ratio of 19.4. But that price is still a whole lot cheaper than the average S&P 500 stock. Its dividend, too, is a bit lower at 4.5% (which is still twice the average yield on the S&P).
Where Southern Company really shines, though, is on the imperturbability of its stock price. With an ultralow beta of just 0.11, it seems like no matter what The Southern Company does, or what the rest of the stock market is doing, this utility -- and its shareholders -- will just calmly go about its business of keeping the lights on.
Need proof? Last quarter, Southern Company shocked the market with a report that profits had dropped 18% year over year. Yet the stock's holding up just fine regardless, down barely 6% from its 52-week high. Now when's the last time you saw a tech stockhold up that well after an earnings decline?
Now, telecom stocks may be another matter -- at least, so long as they sell for a nice price and pay a big dividend yield. In demonstration of which, our final stock suggestion today is the granddaddy of telecom stocks, AT&T (T -1.18%).
Yes, AT&T. This prototypical widows-and-orphans stock offers a lot for retirees to like, starting with a P/E of just 20 (and more than 20% below the typical S&P 500 stock), continuing to its 4.7% dividend yield, and ending with its remarkably stable beta of just 0.37.
Like Southern Company, AT&T is coming off a rough quarter that saw profits slide 39% year over year. Like Southern Company shareholders, though, AT&T investors couldn't care less. The stock is down barely 1% from its 52-week high.
Suffice it to say, if a 39% decline in profits isn't enough to shake this stock, there's not probably much else that will.