Though retiring from a career is a common goal for most Americans, we never quite retire from the investment landscape. After all, longevity data from the Centers for Disease Control and Prevention shows that life expectancies have risen by nine years since 1960. Since we're living longer, it means retirees need their nest eggs to last longer than ever.
The easiest way for retirees to build wealth is to buy stocks that have lasting power throughout the 21st century. But what stocks should retirees consider? That's a question we posed to three of our Foolish investors who selected payment-processing giant Visa (NYSE:V), e-tailing behemoth Amazon.com (NASDAQ:AMZN), and electric utility NextEra Energy (NYSE:NEE).
This company should keep "charging" higher
Sean Williams (Visa): Retirees typically want two things when they buy a stock: capital preservation and income. While income is great, retirees also have to understand that Americans are living longer -- meaning they'll need to focus on wealth appreciation, too, if they want their nest eggs to last. One company that could dominate the 21st century for retirees, and give their nest eggs a nice boost, is payment-processing giant Visa.
One of the most important things Visa brings to the table is its relative lack of risks. For instance, Visa is a payment-processing facilitator, meaning it gets a percentage from each of its merchants for each transaction processed. Even during periods of economic slowness and recession, consumers still are making purchases with their Visa-backed credit cards -- so the impact on Visa is often minimal. What's more, since Visa isn't a lender, it isn't subject to worries about rising credit delinquencies.
Adding to the first point, the payment-processing industry also has an exceptionally high barrier to entry. It takes billions of dollars to lay the infrastructure necessary to run credit card networks, and years to establish rapport with merchants to build up that network. Within the U.S., Visa has an almost insurmountable 50.6% market share, which is more than double its next-closest competitor. This makes it a go-to facilitator that merchants and consumers seek out.
Visa's revenue stream has also become more geographically diverse in recent years. Yes, the company is counting on potentially double-digit growth from emerging-market countries in Africa, Southeast Asia, and the Middle East, but it also gobbled up Visa Europe last summer, increasing its global merchant count to around 40 million.
Visa is first and foremost a growth stock, but it's been doing what it can for its shareholders. The company's dividend has doubled since Aug. 2013, and in April, it announced yet another $5 billion share-repurchase program. While I'm aware that Visa's 0.6% yield might not look enticing, I can attest that its ever-rising share price is one reason its yield has been kept at bay. Visa brings growth, income, and clear competitive advantages to the table, which is all a retiree can ask for.
Call it the century of Amazon
Rich Smith (Amazon.com): There's not a lot I'm certain about when it comes to predicting how the 21st century will unfold, even after 17 years. That said, I think one thing is becoming blindingly obvious: Amazon.com will dominate this century.
From its beginnings as a small seller of books over the internet 20 years ago, Amazon.com has grown into an e-tailing behemoth. Amazon Prime is now a worthy rival to Netflix in online streaming, and Amazon stole Apple's thunder with its Echo smart-home device -- to the extent that, these days, Siri looks almost obsolete. And now, Amazon is coming full circle and reentering the world of physical retail with its purchase of Whole Foods -- sparking a price war and torpedoing the shares of bricks-and-mortar grocers.
Everywhere you look, it seems like Amazon's grabbing market share -- or creating entire new markets for itself to dominate. And the bigger Amazon's business gets, the more it rewards its shareholders. Over the past three-and-a-half years, Amazon has doubled its rate of annual sales, and grown the profits it earns on those sales. Three-and-a-half years ago, Amazon closed out fiscal 2014 with a loss, but over the past year, its profits have approached nearly $2 billion!
Does Amazon pay a dividend? Does it distribute a steady income that retirees can depend on arriving every quarter of the year? No... or at least, not yet. But as Amazon has grown its sales and started reporting profits, its shares have nearly tripled in value -- value that a retiree can easily unlock by selling off a few shares as the need arises. As long as Amazon keeps growing, I don't think the stock necessarily needs to pay a dividend to serve as a source of income for retirees.
As far as I can tell, Amazon stock has no intention of stopping its growth anytime soon in this 21st century.
This stock should light up retirees' portfolios
Sean O'Reilly (NextEra Energy): Retirement is the time to shift investment portfolios to a more conservative posture. However, in a world that's constantly changing, this is easier said than done. Fortunately, the shifting sands of energy production today is exactly why NextEra Energy is the perfect utility stock for retirees in the 21st century.
NextEra Energy, Inc. is a holding company. NEE's subsidiaries include Florida Power & Light Company (which provides just under 5 million Floridians with power), NextEra Energy Resources (an unregulated power generator with nuclear, gas, and wind assets), and publicly traded NextEra Energy Partners (NYSE:NEP), of which it owns 79.9%.
Operating a utility these days isn't a cakewalk. Once a go-to industry for retirees to invest their savings, the utility sector is experiencing disruption on two fronts: government regulation and efficiency gains from renewable fuels. It's for this reason that NextEra truly shines for retirees today.
Last year, its electricity-generation sources were not from coal, but natural gas (70%), nuclear (23%), with coal making up just 4%. It's publicly traded subsidiary, NextEra Energy Partners, owns only renewable-energy assets -- primarily wind and solar.
NextEra is the quintessential 21st century utility, which should give any retiree looking for dividend income a sense of ease. With a current dividend yield of 2.68% and a long runway of dividend/earnings growth projected in the future, NEE is the perfect stock to own in a relentlessly evolving world.
Rich Smith has no position in any of the stocks mentioned. Sean O'Reilly has no position in any of the stocks mentioned. Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Apple, Netflix, and Visa. The Motley Fool has a disclosure policy.
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