Investors in their 60s should seek out strong dividend-paying stocks that feature low-risk business models. American Tower (AMT 1.31%), Retail Opportunity Investment Corp. (ROIC -0.24%), and FactSet Research System (FDS -1.04%) all fit those criteria perfectly. Here's why older investors should seriously consider adding these three stocks to their portfolio.
The ultimate wireless winner
Smartphones are rapidly replacing landlines around the world and billions of internet-enabled devices are expected to come online over the next few years as the Internet of Things trend ramps up. While there are a number of ways that investors can profit from this growth, American Tower is a great choice for risk-averse investors.
American Tower is organized as a real estate investment trust (REIT) and it buys or builds cell towers all around the world. The company then leases out space on its towers to several local wireless carriers at the same time under long-term contracts. That provides the company with predictable amounts of revenue and profits that help to reduce risk.
Given the ever-increasing consumer demand for bandwidth and coverage, American Tower has had no problem growing at double-digit rates. That has provided the company with plenty of capital to reinvest in the business while also paying a continually rising dividend.
American Tower's financial statements look poised to flourish thanks to continued consumer demand for mobile data and the upcoming 5G rollout. While American Tower's dividend yield of 1.9% is on the low side for a REIT, its profit growth trajectory should provide investors with an attractive total return profile. That makes American Tower a great company for even conservative investors to get to know.
A leading data aggregator
Money managers know that it is impossible to make smart investing decisions without accurate information. That's why they all happily pay up to get their hands on up-to-date data that is provided by companies such as FactSet Research System.
FactSet, in particular, collects information from hundreds of different sources and then provides tools that help users make sense of the data. The company's system is so helpful that hundreds of hedge funds, banks, insurers, and more pay a hefty subscription fee to have access. With a customer retention rate around 95%, it is clear that FactSet is doing something right.
Its subscription business model has worked out beautifully for investors. Even during the depths of the financial crisis, FactSet was able to pass along price increases to its customers. That allowed its revenue, profits, and dividend to grow even while the financial markets were in meltdown.
Understandably, Wall Street thinks highly of FactSet's business model and has awarded its stock a high earnings multiple. Despite that, I still think FactSet's stock is worth buying today since its financials have proven to be so resilient. Adding in a dividend yield of about 1.2% is just icing on the cake.
This REIT has a winning formula
Successfully navigating the retail landscape is tough given the growth of e-commerce sales. However, Retail Opportunity Investments (ROIC) has found a unique way to insulate itself from the ever-changing landscape. The vast majority of its shopping centers are located near affluent communities that are densely populated and anchored by grocery stores. The company believes that shopping centers that fit this description will be highly desired by tenants since nearby space is limited and wealthy consumers make weekly trips. Those factors allow ROIC to maintain occupancy rates that exceed 97% and charge regular rent increases.
Thus far, it looks like ROIC's hunch is right on the money. Its revenue, profits, and dividend have all steadily marched higher over time. In turn, ROIC's investors have enjoyed returns that far outpace the REIT sector in general as measured by the iShares US Real Estate ETF (IYR 0.33%).
More recently, many retail REITs have pulled back over concerns of rising interest rates and a slowdown in retail spending. That's giving investors a chance to buy into ROIC at a nice discount. Throw in a dividend yield of 3.8% and I think this is an ideal income stock for conservative investors.