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If You're in Your 70s, Consider Buying These 2 Stocks

By Matthew Frankel, CFP® - Updated Jul 7, 2017 at 8:05AM

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These two stocks can provide lots of income and growth, while still allowing you to sleep well at night.

When you're retired, the ideal stock investments for you will generally have certain characteristics, such as an above-average dividend to generate income and below-average volatility to let you sleep soundly at night. And if a stock has strong growth potential, that's the trifecta. With that in mind, here are two excellent stock investments that could be smart additions to your portfolio while you're in your 70s, as well as how to find other stocks that could work for you.

Company

Symbol

Recent Share Price

Dividend Yield

Beta

AT&T

T

$37.73

5.2%

0.5

National Retail Properties

NNN

$39.10

4.7%

0.4

Data Source: TD Ameritrade. Share prices and dividend yields as of 7/1/2017.

What is beta?

I'll discuss each of these stocks in a moment, but since I included each stock's beta in the chart, here's a quick rundown of what this metric means and why it matters.

Beta is a measure of how volatile a stock is in relation to the rest of the market – specifically, the S&P 500. A beta of exactly one implies that a stock tends to move in line with the index, barring any company-specific movements. A beta of less than one means a stock is less volatile than average, while a beta of more than one means that a stock tends to be more volatile.

70-something couple reading financial documents.

Image source: Getty Images.

For example, AT&T's (T 0.17%) beta of 0.5 implies that if the S&P 500 index drops by 2% on a given day, the stock should fall by about half of that amount. To be clear, it tells us nothing about stock-specific issues. In other words, if a low-beta issues a bad earnings report, it can still be volatile. However, low-beta stocks tend to have less market risk (also known as systematic risk) than most other stocks, which makes them good investment candidates for older investors for whom capital preservation is a priority.

A steady, growing dividend that's over 5%

One stock that makes a lot of sense for retirees is telecom giant AT&T, which pays an impressive 5.1% dividend and has increased its payout annually for more than 30 years in a row thanks to predictable, growing cash flow.

Not only does AT&T pay out a reliable, growing dividend with relatively low volatility, but the company actually has a lot of growth potential going forward. Through its buyout of DirecTV and pending acquisition of Time Warner, AT&T has a leg up on its competition when it comes to broadcasting live content directly to smartphones and tablets, which could be a huge advantage in the coming years as my colleague Andrew Tonner recently discussed.

In fact, thanks to the DirecTV acquisition, AT&T is now the largest pay TV provider in the country, and has been bundling its television and mobile services together to attract new customers and lock in its old ones.

Simply put, AT&T is a rock-solid company with a reliable and growing dividend that is more than twice the average payout of the S&P 500. And with the big moves the company is making, I wouldn't be surprised to see even higher-than-expected dividend growth in the coming years.

The right way to invest in retail

Most brick-and-mortar retail stocks have been beaten down so far in 2017, but it seems that investors are beginning to realize that not all retail is in the same predicament. As one notable example, Berkshire Hathaway recently invested in Store Capital, a REIT that owns net-lease real estate, with a large concentration in retail.

Another retail stock that could work well for older investors is National Retail Properties (NNN -0.38%), a net-lease REIT that invests exclusively in retail properties. The company pays a 4.6% dividend yield, and has a 27-consecutive-year streak of dividend increases. The stock trades for just over its 52-week low as of this writing thanks to the overall retail industry weakness, which makes it an interesting opportunity for income investors.

National Retail Properties owns more than 2,500 properties in 48 states, and it currently has an occupancy rate above 99% thanks to the nature of its tenants and its net-lease structure. Specifically, most of the company's tenants are engaged in retail businesses that are internet-resistant, recession-resistant, or both. Think of businesses like drug stores, gas stations, dollar stores, and movie theaters.

Finally, a net lease means that the tenant is obligated to cover certain variable expenses of owning real estate, such as property taxes, building insurance, and certain maintenance items. Net-leases generally have long initial terms (15+ years) and have annual rent increases, or escalators, built right in. In a nutshell, National Retail Properties simply needs to find a tenant and enjoy years of predictable income.

Matthew Frankel owns shares of AT&T; and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Time Warner. The Motley Fool has a disclosure policy.

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Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
T
$18.04 (0.17%) $0.03
National Retail Properties, Inc. Stock Quote
National Retail Properties, Inc.
NNN
$47.82 (-0.38%) $0.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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