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3 Stocks to Bankroll Your Retirement

By John Bromels – Sep 23, 2020 at 7:35AM

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These top picks are perfect for retirees.

If you're investing for your retirement, you probably aren't interested in flash-in-the-pan stocks. The stocks in your retirement portfolio need to not only last until your retirement date, but for decades beyond. Today's hottest performers may not have that kind of staying power.

Instead, investors should look for stocks that offer stability and the promise of long-term outperformance. Three great picks are NextEra Energy (NEE -1.94%)Stag Industrial (STAG 1.25%), and Dow, Inc. (DOW). Here's why they look like excellent choices to fund your retirement dreams.

An older woman wears sunglasses and makes the "shaka" hand gesture.

Image source: Getty Images.

Fun in the sun

Florida is a hot destination for retirees, both in terms of temperature and popularity. And both of those trends benefit Florida's (and North America's) largest electric utility owner, NextEra Energy. Through its subsidiaries Florida Power & Light and Gulf Power, NextEra serves about 5.5 million customer accounts, mostly in the state's highly populated coastal areas.

There are two big reasons to add NextEra to your retirement portfolio, even if you don't plan to head to the Sunshine State for your retirement. First, as a massive regulated electric utility, the company is very stable. NextEra can count on a reliable stream of cash flow from its customers to fund maintenance and upgrades to its infrastructure. 

Second, NextEra generates about twice as much power as its Florida customers actually consume, so it sells the rest to a diversified group of third-party utilities, corporations, and others. That helps fund the construction of additional solar and wind farms, and also helps fund the company's rapidly growing dividend, currently yielding about 2%. 

NextEra offers stability, longevity, and big growth potential, which makes it an ideal stock for a retirement account.

Double the savings

You might have noticed that not only are some things cheaper online, but they come with free delivery to your doorstep as an added bonus. Real estate investment trust (REIT) Stag Industrial is benefiting from this trend: It focuses on leasing industrial properties, which include manufacturing plants, but also the warehouses and distribution centers necessary for e-commerce. With e-commerce booming and expected to grow even more in coming years, Stag looks like it has good long-term growth prospects.

There's another way Stag can offer you double savings, and that's by putting it into a Roth individual retirement account (IRA). Like all REITs, Stag gets a massive tax break from the government by returning most of its cash flow to investors in the form of dividends. Indeed, Stag's dividend is currently yielding about 4.6%. However, if your REIT shares are held in a Roth IRA, you generally won't have to pay taxes on those big dividends either, meaning you'll get two tax breaks instead of one.

Stag combines a high-growth industry with a big dividend and tax savings, making it an excellent choice for a Roth IRA, but it should do just fine in just about any retirement account.

A straightforward pick

Our last stock is pretty straightforward: Dow, Inc. has been in business for more than a century, making various chemical products. Its recent merger-and-spinoff deal with fellow chemical maker DuPont did shake up its portfolio, but this Dow Jones Industrial Average member is still a solid pick for retirement accounts.

Dow inherited the combined "performance chemicals" portfolio of both it and DuPont. Basically, these are chemicals that aren't sold as products by themselves, but are integral parts of other products or processes. Think coatings, adhesives, lubricants, and packaging material. These types of chemicals are used in almost every industry, from semiconductors to auto manufacturing to healthcare. As a result, Dow's customer portfolio is very diversified. That helps keep the company financially stable. For example, even as manufacturing chemical sales dropped in Q2 due to the coronavirus pandemic, stronger sales in healthcare and packaging helped to make up the difference.

While Dow's growth prospects may not be as high as NextEra's or Stag's, its reliability and diversification -- plus its current 5.5% dividend yield -- make it a worthy addition to a retirement portfolio.

Set it and forget it

Most people don't want to be burdened with actively managing their retirement account. While it's always a good idea to keep an eye on your portfolio to safeguard against surprises, NextEra Energy, Stag Industrial, and Dow are the types of long-term picks you shouldn't need to babysit. They look like great choices for the long haul.

John Bromels owns shares of NextEra Energy, Stag Industrial, and The Dow Chemical Company. The Motley Fool owns shares of and recommends Stag Industrial. The Motley Fool recommends NextEra Energy. The Motley Fool has a disclosure policy.

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Stocks Mentioned

The Dow Chemical Company Stock Quote
The Dow Chemical Company
DOW
NextEra Energy Stock Quote
NextEra Energy
NEE
$82.11 (-1.94%) $-1.62
Stag Industrial Stock Quote
Stag Industrial
STAG
$31.65 (1.25%) $0.39

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

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