Ideally, a person can expect their retirement to stretch on for decades. That kind of time horizon gives you flexibility to own at least some stocks because you can ride out those inevitable down years without being forced to book losses during low points in the market.
Still, a retiree's stock preferences likely tilt toward stable businesses with long track records of earnings growth. A healthy (and rising) dividend is probably high on your list of requirements, too.
Below, we'll look at a few stocks that meet all of those criteria.
A diversified consumer products giant
Procter & Gamble (NYSE:PG) hasn't missed a chance to boost its annual dividend payout for over 60 years. And while the company has endured disappointing sales growth lately, its dominant market position and deep portfolio of consumer staple products help ensure that investor returns are protected against big declines.
Sales growth was a meager 2% last year, for example, but P&G still managed to increase profit margins while converting more than 100% of its earnings into free cash flow. As a result, shareholders saw a decent 3% dividend raise as part of over $22 billion returned to them through dividends and stock repurchase spending.
P&G plans to lean on its core franchises including Tide, Gillette, and Pampers to drive faster and more profitable growth over the coming years. Organic sales should increase by 2.5% in 2017 to mark the second straight acceleration in that key metric. Sure, you could find significantly faster growth in other industries. But P&G provides stability, and a hefty 3% dividend yield to help compensate investors for that relatively weak expansion pace.
Retailing's biggest winner
Wal-Mart (NYSE:WMT) combines several characteristics that tend to produce healthy long-term investing results. It's by far the dominant player in its industry thanks to its rare ability to deliver unbeatable value to its customers. The retailer's rock-solid finances, meanwhile, give it flexibility to protect market share through price cuts even while management invests aggressively in new growth areas like e-commerce.
That strategy is delivering healthy results lately, with improving customer traffic powering an almost 2% uptick in comparable-store sales last quarter. Wal-Mart also enjoyed a 60% surge in revenue through the digital sales channel. Together, these two trends suggest the world's biggest retailer should do fine even as spending shifts toward e-commerce in the decades to come.
In the meantime, income investors can look forward to strong dividend growth ahead: Wal-Mart's payout ratio has surged over the past few years but remains below 50% of annual earnings.
The steady profits of fast food
McDonald's (NYSE:MCD) recently gave its shareholders a hefty 7% dividend raise as part of management's plan to send $23 billion to investors between 2017 and 2019. An operating rebound is helping fund those surging returns. In fact, rising customer traffic just powered McDonald's best growth pace in over five years.
McDonald's finances are also being lifted by a shift toward franchising. Executives are selling corporate locations, which today comprise about 15% of the store base, to franchisees to bring that percentage down to just 5%. The move will result in lower reported revenue but significantly higher profits. So far this year, for example, sales are down 3% while net income has soared by 20%.
Mickey D's thinks the franchising shift should help it achieve operating margin of around 45% by 2019, compared to 37% today. That improvement is likely to provide plenty of stability to earnings growth as retirees wait for the company's strategic initiatives, including home delivery and menu tweaks, to keep the company firmly in the leadership position in the fast-food industry.