For many Americans, 2020 is a year they won't soon forget. The coronavirus disease 2019 (COVID-19) pandemic has exacted a huge physical and financial toll on our country, with well over 137,000 Americans losing their lives, and more than 20 million folks losing their jobs.
It's also a year that saw unprecedented stock market volatility. In less than five weeks, the broad-based S&P 500 went on to lose 34% of its value. It was, by far, the quickest descent into bear market territory in history, and easily the fastest 30%-plus decline registered of all time.
While volatility is always present in the stock market, it's a big worry for retirees. You see, with longevity increasing steadily over many decades, most seniors can't simply sit on their nest eggs any longer and hope they don't outlive their money. In many instances, investing needs to continue well beyond a worker's retirement date to ensure they don't outlive their retirement capital.
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Though the prospect of investing in the stock market right now might sound intimidating for seniors, it doesn't have to be. Below are three perfect stocks for retirees to buy right now that'll provide a healthy combination of income and growth potential, all while allowing seniors to sleep well at night.
NextEra Energy
Call this a staple investment for retired workers, with a twist.
Generally speaking, electric utility stocks are a great place for retirees to park their money. Utilities provide a basic-need good and service, such as electricity or water, where demand tends to fluctuate minimally. While the vast majority of utility stocks pay a dividend, this is typically a slow-growth sector. But that's not the case for NextEra Energy (NEE -0.52%).
NextEra Energy is the largest electric utility by market cap -- but this isn't the reason seniors should be buying. Instead, what separates NextEra from its peers is the fact that it's the leader in wind and solar power generation among utilities. NextEra has spent big bucks modernizing its capacity, but is now reaping the rewards of this strategy with substantially lower electricity generation costs than its peers. Sitting on the cutting edge of the renewable transformation should allow NextEra to continue growing its earnings per share by a high-single-digit percentage for the foreseeable future.
Beyond its renewable energy segment, NextEra's traditional electricity operations are regulated. Though the company can't simply pass on price hikes whenever it pleases, it also means NextEra isn't exposed to potentially wild fluctuations in wholesale electricity pricing. In other words, there's plenty of cash flow predictability to be had with NextEra.
Having nearly quadrupled its quarterly payout since 2005, NextEra is currently yielding a healthy 2.2% a year.
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AT&T
It's far from flashy, but telecom giant AT&T (T -0.43%) can still get the job done for retirees if they're looking for a superior income stock with modest upside potential.
There's no question that AT&T's high-growth days are long gone. But there are a handful of catalysts this decade that can push AT&T's profit needle in the right direction. For example, there's the rollout of 5G networks. This is the first time in about a decade that AT&T is spending big to upgrade its wireless infrastructure around the country, and it's not going to happen overnight. The good news is that we're likely to see a multiyear technology upgrade cycle that results in a substantive uptick in data usage. Since data is the bread-and-butter of margin generation for AT&T's wireless division, 5G could be a serious shot in the arm for the company.
AT&T is also expected to focus on its streaming offerings to offset weakness in traditional cable. In late May, the HBO Max streaming service was launched with more than 10,000 hours of premium content. As of December 2019, HBO (formerly HBO Now) and HBO Go had approximately 43 million subscribers. AT&T is targeting a near-doubling of this figure to 80 million global subscribers for HBO Max by 2025.
And don't overlook AT&T's efforts to sell noncore assets and reduce its debt levels following the acquisition of Time Warner in 2018.
Already a Dividend Aristocrat, AT&T is yielding a cool 6.9%. With reinvestment, seniors can expect to double their money from this payout alone in a little over a decade.
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Broadcom
Retirees also shouldn't be afraid to invest in higher-growth technology stocks, like semiconductor giant Broadcom (AVGO -2.48%).
While it's a near-certainty that Broadcom's chip segment is going to encounter weaker demand in the very near-term due to COVID-19, there are two significant catalysts that should fuel superior earnings growth throughout much of the decade.
To begin with, Broadcom is going to be a huge beneficiary of the 5G network rollout. Broadcom is a key manufacturer of the 5G wireless chips and other accessories being used in the next-generation of smartphones. Approximately three-quarters of the company's sales are derived from smartphones. Thus, as this technology upgrade continues over many years, Broadcom should see a steady uptick in demand for its wireless solutions.
Broadcom should also benefit greatly from the push into the cloud by enterprises. Though we were already witnessing a steady shift from static offices into remote and shared workspaces in the cloud long before COVID-19, the pandemic has put the pedal to the metal when it comes to this ongoing transformation. That's great news for Broadcom, which is a manufacturer of access and connectivity chips that are used in enterprise data centers.
Over the past decade, Broadcom's quarterly dividend has grown by more than 4,500%, with the company now yielding 4.1%. This makes Broadcom the perfect blend of growth and income for retirees.
