What's the ideal stock for a retiree? A solid dividend is high on the list. So is a stable business model that ensures those dividends keep flowing. Opportunities for growth would also be great.
There are three stocks that I think meet all of these criteria: Brookfield Infrastructure Partners (BIP 0.32%), Iron Mountain (IRM 0.50%), and Welltower (WELL +0.80%). Here's why these three especially stand out as top stocks for retirees.
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1. Brookfield Infrastructure Partners
Brookfield Infrastructure Partners, like its middle name says, focuses on infrastructure. In particular, the company owns and operates communication towers, energy transmission and storage systems, ports, railroads, toll roads, and utilities.
The assets that Brookfield Infrastructure owns generate steady cash flow, with around 95% of the company's adjusted EBITDA coming from regulated or contracted revenue. Brookfield Infrastructure's goal is to distribute 60% to 70% of its funds from operations as dividends. Its dividend currently yields 4.85%.
What makes this stock even more attractive to retirees is that Brookfield Infrastructure has solid growth prospects. As a case in point, the company recently acquired Enbridge's natural gas gathering and processing business in western Canada. This acquisition provides Brookfield Infrastructure an excellent source for added cash flow and potential growth. My Motley Fool colleague Matt DiLallo thinks that the deal could enable Brookfield Infrastructure to boost its dividend at the high end of the company's 5% to 9% annual target range.
2. Iron Mountain
Iron Mountain is the world's largest provider of records and data storage. To give you an idea of just how large the company is, consider that Iron Mountain claims 225,000 customers in 53 countries -- including roughly 95% of the Fortune 1000. The company stores 680 million cubic feet of hard-copy records, 1 billion medical images, 89 million pieces of media, and a whole lot more.
With a huge customer base and a very high customer retention rate, Iron Mountain can count on a stable source of revenue. The company is organized as a real estate investment trust (REIT), which means that it must return at least 90% of taxable income to shareholders as dividends. Iron Mountain's dividend yield currently stands at a hefty 6.48%.
I view Iron Mountain as a dividend investor's dream, not only because of its strong dividend and solid business model, but also because of its growth prospects. The company should have a significant opportunity for growth in North America from un-vended storage. Iron Mountain's expansion into data center management and ancillary businesses like fine art storage present even greater growth opportunities.
3. Welltower
Welltower ranks as the largest healthcare REIT in the U.S. The company owns senior housing properties such as assisted-living facilities, independent-living facilities, continuing care retirement communities (CCRCs), and Alzheimer's/dementia care facilities, plus outpatient medical properties including physician offices, ambulatory surgery centers, diagnostic facilities, and labs.
Like both Brookfield Infrastructure and Iron Mountain, Welltower generates a steady cash flow from the assets that it owns. The company's dividend currently yields 5.16%.
Retired investors should also really like Welltower's long-term growth prospects. The number of Americans aged 85 and over should double in the next two decades, while the number Americans aged 65 and over is projected to increase by 36% by 2025. These demographic trends should drive demand for the types of properties that Welltower owns.
Risks
All three of these stocks face some risks. A stock market downturn would likely pull Brookfield Infrastructure, Iron Mountain, and Welltower down. All three companies rely on debt to finance expansion, so rising interest rates could present some problems.
Nonetheless, I think these stocks are great picks for retired investors. All three companies are leaders in their respective areas, are in solid financial shape, and should be able to keep the dividends flowing for years to come.
