If you're one of millions of baby boomers who've either retired or are approaching retirement, the stock market can serve as an ideal place to help you reach your goals. But finding the best stocks suited for that task is easier said than done.
So we asked three top Motley Fool investors to each discuss a stock that they believe fit the bill for baby boomers today. Read on to learn why they chose Facebook (NASDAQ:FB), Wal-Mart (NYSE:WMT), and 3M (NYSE:MMM).
Harnessing the power of social media
Steve Symington (Facebook): There's no arguing that Facebook is already the social media world's 800-pound gorilla. But it's poised to continue growing both its top and bottom lines at an impressive clip, and I think baby boomers -- or any investor, for that matter -- would do well to pick up shares today.
For one, Facebook grew its daily and monthly active users by an incredible 16% year over year last quarter, to 1.37 billion and 2.07 billion people, respectively. And while Facebook is free, it's effectively monetizing that base through advertising, sales from which climbed 49% last quarter to over $10.1 billion. Its quarterly earnings skyrocketed 79% to $4.7 billion.
But in case you're wondering how long Facebook can keep this up, note that around two-thirds of the world's 7.6 billion people still don't have access to the internet -- something Facebook is helping to solve through its ambitious Internet.org initiative -- leaving the company with a massive long-term runway for growth as those new users come online.
However, responsibly making the most of its reach isn't always easy; Facebook's founder and CEO, Mark Zuckerberg, lamented that the platform was used to "sow mistrust" during last year's U.S. election cycle -- actions that ran contrary to Facebook's goal to "help people connect and bring us closer together."
As a result, Facebook is making massive investments in security that will impact its bottom line in the near term. But that should only reinforce its leadership position and the trust of its users over the long term.
Retail's greatest turnaround play
Leo Sun (Wal-Mart): A few years ago, it looked like Amazon.com would crush Wal-Mart, so the superstore frantically slashed prices across its disheveled stores. But Wal-Mart eventually made a comeback under CEO Doug McMillon, who took over the top job in late 2014.
McMillon focused on turning thousands of Wal-Mart stores into fulfillment centers for online orders, started offering curbside pickup and home deliveries, expanded its digital ecosystem with more efficient apps and payment systems, and matched Amazon blow for blow with lower prices and big single-day sales events.
McMillon also hiked wages and offered employees better training and career paths for advancement through the company. As a result, stores became better organized, cleaner, and more efficient -- and the shoppers noticed. Wal-Mart posted six straight quarters of positive year-over-year sales growth through the second quarter of 2017, and is expected to post 2% sales growth this year and 3% growth next year.
The company's earnings, which were previously weighed down by its investments in e-commerce and employees, are now expected to grow 1% this year and 6% next year. Those aren't the growth figures of an "Amazoned" retailer, and strongly indicate that Wal-Mart is here to stay. The stock still trades at a reasonable 20 times next year's earnings, and pays a forward dividend yield of 2.3% -- which is supported by a low payout ratio of 49%. It's also hiked that dividend annually for over four decades.
A stable dividend giant for everyone
John Bromels (3M): Not all stocks are going to be right for all baby boomers. Some have already reached retirement age and have a goal of long-term capital preservation. They'll likely be looking for a large, solid company with a secure dividend. Others are looking to grow their portfolios while they are still in the workforce, and are looking for a stock that will offer opportunities for share growth as well as stability.
Both groups should be interested in 3M (NYSE:MMM). The materials science company has something to offer no matter what your financial goals are.
Let's say you're interested in capital preservation. Good news: As a Dow Jones Industrial Average component and one of the largest chemical companies in the world, 3M has an incredibly diversified portfolio that helps to keep its share price steady even during turbulent times. It also invests heavily in research and development, filing more than 3,000 patents each year.
If it's a steady income you're after, 3M can help you there, too. The company has increased its dividend annually for the last 60 years, making it a Dividend Aristocrat. Since the Great Recession, its yield has pretty consistently stayed in the 2% to 3% range. Not bad.
Plus, 3M's share price has skyrocketed 159.1% over the last five years, almost double the S&P 500's 86.3% gain. That's why its dividend yield has stayed fairly constant despite the annual dividend hikes: The company's share price is growing almost too fast for the dividend to keep up with. This isn't just speculation. In the most recent third quarter in 2017, revenue was up 6% and net income rose 8% year over year, and the company raised its full-year guidance.
3M is a stock that could be at home in just about any portfolio.
The bottom line
There's no guarantee that Facebook, Wal-Mart, or 3M will deliver outsized gains going forward. But we love their chances considering they're all on sound financial footing, operate from positions of strength and industry leadership, and have shown staying power and the ability to consistently create shareholder value over the years -- all enviable traits that baby boomers can use to bolster their financial fortunes.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Bromels owns shares of Alphabet (C shares), Amazon, and Facebook. Leo Sun owns shares of Amazon. Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (C shares), Amazon, and Facebook. The Motley Fool recommends 3M. The Motley Fool has a disclosure policy.