If you're retired, you'll want to be especially picky about where you put your money. Some investment alternatives that might be fine for your children might not be so great for you. Ideally, you'd be best off with stocks of companies with solid business models, dependable dividends, and some potential for growth.
There are plenty of stocks that fit those criteria, but three especially stand out right now in my view. Here's why Bristol-Myers Squibb (BMY 3.91%), Iron Mountain (IRM +0.95%), and Wells Fargo (WFC 1.59%) are stocks for retirees to consider buying.
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Bristol-Myers Squibb: Long history and great prospects
Bristol-Myers Squibb's roots go back to 1887. The company has developed some of the world's best-selling drugs during its long history. Bristol-Myers Squibb (BMS) has refined its business model in recent years, selling some of its over-the-counter products and its diabetes business, to focus on areas that generate the most shareholder value.
Two drugs shine as the crown jewels for BMS -- Opdivo and Eliquis. Opdivo first won U.S. regulatory approval for treating advanced melanoma in late 2014. Since then, the drug has gained approval for treating additional indications, including lung cancer and kidney cancer. Eliquis first won approval in late 2012 to reduce the risk of stroke and blood clots. Both drugs generated sales topping $1.1 billion in the first quarter of this year.
BMS's dividend currently yields 2.82%. That dividend is likely to increase in the coming years, since the drugmaker is using just over half of its earnings to fund the dividend program.
Those earnings are likely to grow briskly as well. Wall Street analysts project average annual earnings growth of more than 9% for BMS over the next five years. BMS is partnering with multiple drug companies to study Opdivo in combination with other drugs. These combination regimens could provide the greatest success in fighting various types of cancer.
Iron Mountain: The REIT stuff
Iron Mountain is a real-estate investment trust (REIT), but with a special niche that makes the stock particularly attractive. The company focuses on operating storage facilities for records and data storage. If you're wondering how much demand there is for this type of storage, consider that Iron Mountain claims more than 230,000 customers in 45 countries across the world, including around 95% of the Fortune 1000.
The company isn't new to the business. Iron Mountain is now in its 66th year of operations, although it has only been a REIT since 2014. Its growth has been phenomenal, especially in the past two decades. In 1996, Iron Mountain operated fewer than 85 facilities. Today, that number stands at over 1,400.
Iron Mountain's dividend yield of 6.3% is so appealing that my colleague Matthew Frankel recently ranked Iron Mountain as one of the top five dividend stocks in real estate. That high ranking is well deserved.
Although the company hasn't enjoyed great earnings growth in recent years, that could be about to change. Wall Street analysts estimate that Iron Mountain will increase its earnings by an average annual rate of 32% over the next five years. Iron Mountain should be able to generate that impressive growth through acquisitions and international expansion.
Wells Fargo: Bank on its long-term performance
Wells Fargo was founded in 1852 and is now one of the world's largest financial institutions. The company provides retail, commercial, and corporate banking services in all 50 states, the District of Columbia, and other countries. Wells Fargo's other operations include a securities brokerage, insurance agency, and investment advisory services.
The company received a lot of negative publicity last year from a scandal involving employees who opened fake accounts for customers. However, it doesn't seem likely that the scandal will harm Wells Fargo stock over the long run.
Retirees should like Wells Fargo's dividend, which currently yields 2.78%. The company uses only 38% of its earnings to fund its dividend, so there's plenty of room for future dividend increases.
Wells Fargo should also enjoy solid growth in the coming years. Analysts think the big bank will be able to increase earnings by an average annual rate of 8% through the next five years.
