Please ensure Javascript is enabled for purposes of website accessibility

3 Stocks Every Retiree Should Consider Buying

By Anders Bylund, Dan Caplinger, and Jason Hall - Oct 19, 2017 at 7:34PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These tickers will help you manage and maintain your wealth when it's time to crack open that nest egg.

In the years leading up to your retirement, stock investments will help you build that nest egg. But the investing doesn't stop when the golden years start -- it's just your requirements that change.

So, we asked a few of your fellow investors here at The Motley Fool to share a few stock ideas tailored to the actual retiree. They came up with some golden combinations of powerful dividends, deep-discount value, and stability for the long haul. Read on to learn why our panel recommends investing in Alphabet (GOOG -2.57%) (GOOGL -2.45%), Welltower (WELL -1.06%), and Coca-Cola (KO 0.29%).

Senior businessman holding up a newspaper with stock listings.

Image source: Getty Images.

Search no longer for the right retiree stock

Dan Caplinger (Alphabet): Retirees often feel like they have to invest solely in dividend-paying stocks of conservatively oriented companies. On that score, Alphabet seems like a nonstarter, with no dividend and plenty of aggressive bets on high-growth areas like self-driving automobiles, smart speaker systems, and next-generation mobile devices.

Yet even retirees need to understand that long-term growth is an important aspect of nearly everyone's investment portfolio, and Alphabet brings some valuable characteristics to the table. The strength of the Google search engine remains unchallenged, and that provides a core foundation of revenue and profit on which shareholders can rely well into the future. At the same time, growth initiatives ensure that the tech giant will remain a key player in new trends and avoid the danger of falling out of touch with changing conditions in the industry.

With projections for 20% earnings growth annually over the next five years, Alphabet's stock doesn't even look that expensive compared to some of its peers. Retirees might not see Alphabet as the most obvious retirement-oriented stock, but its combination of growth potential and value make it an attractive choice for those who can't afford to live solely on dividend income for the rest of their lives.

You can't beat the real thing

Anders Bylund (Coca-Cola): Selling sugary drinks has not been an easy business in recent years. In response, Coca-Cola has diversified and staked out a new path forward.

The company is listening to the wants and needs of consumers around the world and adjusting its product mix accordingly. Today, many customers are looking for all-natural ingredient lists and lower sugar content. No problem -- Coca-Cola is already a global market leader in fruit juices, bottled water, sports drinks, and ready-made iced tea products. By shifting around its marketing budgets and development efforts, this company can protect and extend these important business advantages until sweetened drinks are in fashion again.

Meanwhile, the core portfolio of sparkling soft drinks is getting a makeover with new low-sugar and sugar-free options and revamped package sizes. The worldwide production and distribution system is also getting a makeover, designed to widen Coca-Cola's margins and long-term competitive strength. Coca-Cola is ready to compete for the long run, even if that means making some fundamental changes along the way.

And the cash machine continues to run. Coca-Cola has produced $6.4 billion of free cash flow over the last four quarters, returning every penny to shareholders in the form of dividends and share buybacks. Dividend payouts have more than doubled over the last decade, and Coca-Cola's payout increases are have been like clockwork:

KO Dividend Chart

KO Dividend data by YCharts.

This company combines long-term vision with unrivaled business scale and a valuable brand name. Coca-Cola rolls with the punches and comes back swinging. Expect those juicy dividend checks -- currently yielding 3.2% -- to keep coming and keep growing.

Profit from a trend of your own making

Jason Hall (Welltower Inc): Today's retirees are part of a huge trend that's going to have implications on many things -- none moreso than healthcare and housing. This trend is on track to create a huge, decades-long growth opportunity for Welltower. Over the next dozen years, almost 40 million Americans will reach age 65, and the number of 85-plus Americans is expected to double within 20 years. 

This is going to require a significant increase in the number of housing and healthcare facilities to meet the needs of this aging population. Welltower is positioned to be one of the biggest companies to help meet this need in the U.S. as well as Canada and the United Kingdom, which will see their older populations increase at similar rates as in America. 

As a real estate investment trust, or REIT, Welltower is also an excellent income stock since it must pay 90% or more of its earnings in dividends. At recent prices, it pays a 5% yield, and has a pretty solid track record of growing the payout over the past 25 years, and should remain a great income growth stock based on its prospects. Trading for 16.4 times funds from operations it's not exactly dirt-cheap, but with a steady source of cash flows that support the dividend and a huge secular trend set to drive years of growth, it's exactly the kind of stock that makes sense for retirees to buy and hold. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
$2,179.26 (-2.45%) $-54.77
The Coca-Cola Company Stock Quote
The Coca-Cola Company
$62.91 (0.29%) $0.18
Welltower Inc. Stock Quote
Welltower Inc.
$82.35 (-1.06%) $0.88
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,187.45 (-2.57%) $-57.68

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.