Lacking a flexible investing time horizon that stretches into several decades, retirees tend to favor stable businesses with long track records of sales and earnings growth. Hefty dividend yields are helpful, too, since they can cushion returns from volatility while providing a steadily growing source of income.
There aren't many stocks that meet those strict criteria. But McDonald's (MCD -0.05%), Kimberly-Clark (KMB 1.28%), and Home Depot (HD -1.77%) all fit the bill. Read on to learn why they could make good long-term investments for those at or near retirement.
Image source: Getty Images.
McDonald's for growth
McDonald's business is enjoying a tasty rebound right now. After enduring declining customer traffic for years, the fast food giant's aggressive menu changes, including all-day breakfast and the switch to more natural ingredients, appear to be turning the tide. Sales growth hit a market-thumping 7% in the second quarter to mark the chain's fastest expansion pace in over five years.
Image source: Getty Images.
McDonald's is planning to stay ahead of shifting consumer tastes by continuing to embrace change in the coming years. One of its biggest long-term initiatives involves home delivery. In fact, this offering could quickly make Mickey D's one of the world's biggest delivery services, given that 75% of the population in its biggest global markets lives within three miles of one its restaurants.
Retirees will also find plenty to like about McDonald's improving finances. Its refranchising initiative is set to push profitability to a record high, which should give management all the funds it needs to consistently hike the annual dividend -- just as the company has in each of the last 41 years.
Home Depot for profits
Don't let worries about the next housing market slump keep you away from one of the market's most impressive businesses. After all, Home Depot isn't just trouncing most other retailers today, it's also widening the gap between itself and industry rival Lowe's (LOW -1.40%). Sales growth sped up to a 6.3% pace in the second quarter from 5.5% while its smaller peer was stuck at below 5%.
Rising customer traffic levels suggest there are more market share wins ahead for this company, even as it pushes toward management's long-term profitability goal of a 15% operating margin.
LOW Operating Margin (TTM) data by YCharts
There's bound to be another cyclical downturn in the home improvement industry. Yet Home Depot emerged from the last slump as a much stronger business, one that prioritizes cash returns to investors through aggressive dividend and stock repurchase spending.
Kimberly-Clark for the yield
Kimberly-Clark shares have underperformed the market over the last few years as the consumer goods giant's sales pace hit a wall. Organic growth dropped to 2% last year from 5% the year before, and management's latest forecast calls for another slowdown, to roughly flat, this year.
There's plenty for investors to find attractive about this business, though. Kimberly-Clark's profit margin is improving as the company slashes costs. Its growth performance in developing markets continues to outpace the overall business, and it dominates most of the product categories in which it competes.
Retirees can expect to be well compensated for their patience as they wait for the company's growth pace to recover along with an eventual rebound in the core U.S. market. Kimberly-Clark's 3.2% dividend yield is more generous than rival Procter & Gamble's, and it has seen faster growth over the past few years, too.
The dividend should continue rising at a healthy pace in 2018. Management's latest forecast calls for $6.20 per share of profit this year, to put its payout ratio at an aggressive, but sustainable 62%.
