When looking for retirement stocks, investors typically value a stable, profitable business with a strong dividend history. The closer you are to retirement, the more valuable stability becomes -- often at the expense of growth. Younger investors, by contrast, might be looking for more growth than your traditional retirement-worthy stocks.

But what if a company could give you stability, growth, and a dividend? I believe Nasdaq (NDAQ 0.90%) can, and it's a stock you've probably overlooked for your retirement.

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Nasdaq's core business

When you hear talk of Nasdaq, often it's referencing the stock exchange. Nasdaq the company owns Nasdaq the exchange, and it's the core of the business. The company generates revenue from listing fees, initial public offering (IPO) fees, and trading activity. These and other services are accounted under the corporate services and market services segments of the business, and accounted for 55% of revenue in 2019. 

Even in an economic downturn, Nasdaq can thrive. True, fewer companies go public in turbulent times like now, which results in less IPO revenue. For example, 188 IPO companies chose to list with Nasdaq in the U.S. in 2019, which was 78% of all IPOs. But in the first-quarter earnings call, CEO Adena T. Friedman said the majority of IPO candidates are currently waiting for market volatility to die down. As companies wait to list, Nasdaq loses revenue.

However, even when the market crashes and IPOs delay, Nasdaq makes money from increased trading volume. The company said it saw a surge in trading volume in Q1, which was the primary reason its market services segment grew quarterly organic revenue by 21% year over year. 

For trading volumes, consider the case of popular brokerage app Robinhood. In an interview on CNBC's Mad Money, Robinhood's co-CEO disclosed that during March, trading volume on the app was up 300% just from the fourth quarter of 2019. What's more, deposits were up an astounding 1,700% from Q4. This demonstrates that not only do trading volumes increase when the market crashes, but that investors also prepare for the next bull cycle with cash.

So whether stocks go up or down, Nasdaq is positioned for continued success in its core business. That's why I call this business stable.

The growth segments

While the core business is incredibly stable, there are limits to the growth it can provide. That's why Nasdaq diversified into some better growth opportunities. Through its market technology and information services segments, the company offers data and analytics to customers like brokerages and equity firms. In 2019, these segments accounted for much of Nasdaq's growth. The market technology segment's revenue grew 25%, while information services grew 9%. 

Not all of these segments' revenue is recurring, but some is. Annualized recurring revenue (ARR) is a term that looks at the recurring revenue during the quarter, and extrapolates it over a year. Nasdaq's ARR for Q1 was $257 million, up 9% from last year. That's not very much when compared to its $2.6 billion in trailing-12-month net revenue. Nevertheless, it's a growing portion of revenue and less prone to fluctuations, since it's based on long-term subscriptions. It gives added stability even among Nasdaq's growth segments.

To be clear, Nasdaq offers a modest growth opportunity. Long-term organic-revenue growth guidance for just these two segments is 5% to 7% annually. The rest of the business should grow even more slowly. It can speed up overall growth with acquisitions, and it often does. But the point is that Nasdaq offers more growth than many retirement stocks, while also offering more stability than many growth stocks.

Shareholder reward

Nasdaq is profitable and generates a lot of free cash flow. Consider that from the beginning of 2016 to the end of 2019, it generated $3.1 billion in free cash flow from $9.7 billion in net revenue. The company frequently makes acquisitions to help with revenue growth. But it also buys back shares to provide a little extra boost to earnings-per-share growth. And it pays a dividend.

NDAQ Chart

NDAQ data by YCharts

Nasdaq's dividend isn't big -- its yield is currently under 2%. But the company is establishing a respectable track record. The dividend has been paid every quarter since June 2012, and it's been raised for seven consecutive years. The amount of earnings it pays out as dividends, known as the payout ratio, is still modest at 26%, suggesting that annual dividend increases are possible for the foreseeable future. 

If you're close to retirement or already retired, you want your dividend payers to have little risk of getting cut, and Nasdaq fits that description. But if retirement is still a ways off, you likely want something safe that can still compound growth from now until your target date. Again, Nasdaq can. That's why I think it has a place in any balanced retirement portfolio.