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Market Turmoil: Buy These 5 Stocks to Protect Your Retirement

By James Brumley – Updated Sep 26, 2020 at 12:26PM

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Stable, all-weather picks can help shield your portfolio from the sort of volatility the market has been experiencing of late.

The S&P 500's more than 9% decline in September from its recent peak can't quite be categorized as a market crash, but it's a big enough dent to remind investors they can take nothing for granted. And for those investors near or in retirement, sharp sell-offs like this can be even more worrisome. For some, the September swoon may have forced a rethinking of retirement budgets.

With that as the backdrop, here's a rundown of five safer stocks you can use to protect your retirement account from more market turmoil.

Written retirement plan lying on a desk, with a calculator and pens

Image source: Getty Images

1. Waste Management

The old cliche about death and taxes is true but incomplete. As long as people populate the Earth, they'll be creating new trash to dispose of.

Enter Waste Management (WM 1.01%), the world's biggest trash collection company. It operates 244 landfills serving 20 million customers, as well as a whole slew of recycling and gas-to-energy facilities. This portfolio positions it well for a future in which legislation is likely to eventually mandate such things.

That's not the coolest thing about Waste Management for current and soon-to-be retirees, though. The company notes that more than 75% of its top line has "annuity-like characteristics." Translation: A huge chunk of its business is recurring revenue, which has helped it boost its dividend annually for 17 consecutive years. The current yield of 1.9% isn't stellar, but the payout grows regularly for sustainable reasons.

2. Procter & Gamble

Procter & Gamble (PG 0.84%) is, of course, the well-known consumer goods giant behind brands like Pampers diapers, Gillette shaving supplies, Tide laundry detergent, and Bounty paper towels (just to name a few of its numerous brands). These are products that people not only buy over and over again, but brands that foster customer loyalty.

Investors who have been following this company probably know P&G wasn't at its best just a few years ago, perhaps in part due to its sheer size or having the wrong corporate culture for the early part of the 21st century.

However, P&G has largely completed the long process of shrugging off what was holding it back. In 2014, now-former CEO Art Lafley began the divestiture of more than 100 brands that were more distractions than profit centers. Current CEO David Taylor, who took over, in 2015, continued that work and also began an overhaul of how the consumer staples giant markets products and hires employees. Among other changes, Procter & Gamble is now leveraging digital consumer data and hiring more outside talent to bring new know-how in-house.

The impacts of these changes have been slow to reveal themselves, and they've recently been obscured by the impact of the COVID-19 pandemic. But, once the coronavirus crisis is in the rear-view mirror, investors will be better able to recognize that Procter & Gamble is a completely different company than it was just a few years ago.

3. Realty Income

All real estate investment trusts (REITs) feel a bit risky in the current environment, but especially ones like Realty Income (O 1.55%) that specialize in retail tenants. The retail industry was already on its heels before the coronavirus appeared, but the pandemic has forced many more chains and small businesses into bankruptcy.

Realty Income's tenant list isn't made up of many consumer-facing companies fighting for their lives, though. Its biggest tenants include Walgreens, 7-Eleven, Dollar General (DG 1.33%), FedEx, and Family Dollar -- part of the Dollar Tree organization -- just to name a few. Walmart (WMT 1.22%), Circle K, CVS, and Kroger are also major tenants. Most of those chains are holding up well in this strained economic environment -- and some of them are even thriving in it.

That's not to suggest all of Realty Income's renters are on top of the world right now. Movie theater chains AMC Entertainment and Cineworld's Regal Cinemas are both among its top 10 tenants, and the theater industry is in real trouble.

Even so, Realty Income recently announced that it collected 93.5% of the rent it was due in August, a major improvement from its 87.8% collection rate in June when the economic impact of coronavirus shutdowns was at its worst. The REIT's historically solid dividend, currently yielding 4.6%, isn't in any real danger.

4. Dollar General

Not only is Dollar General a reliable Realty Income tenant, it's also a solid investment in its own right.

That may sound hard to believe, given today's conditions -- but this retailer may not be the company you think it is. It has spent the last several years deliberately doing some things differently than Walmart while doing other things exactly like Walmart does. Namely, it has established smaller stores in neighborhoods where Walmart's aren't nearby, and it added a robust selection of groceries to those stores, including (in some cases) fresh produce and chilled goods. End result? Around three-fourths of people in the U.S. live within five miles of a Dollar General store, and the company says the average shopper can be in and out of a store in less than 10 minutes and get most everything they need.

The clincher for retirees: While Dollar General's strategies are driving strong sales growth, the company is also boosting its dividend. As my fellow Fool Jon Quast pointed out a few days ago, the stock's current dividend yield of around 1% isn't much to write home about, but the retailer has been raising its payout at a double-digit-percentage pace for the past few years.

Income, growth, and stability? That's an ideal retirement holding.

5. Dominion Energy

Finally, add utility name Dominion Energy (D 0.40%) to the list of stocks that can protect your retirement portfolio.

The case here is fairly obvious: Consumers under financial stress might skip a vacation or postpone the purchase of an automobile, but they're not going to go without electricity. Dominion delivers it to 7 million customers in 20 states and passes along a generous portion of its earnings to shareholders in the form of dividends.

Sure, the company recently cut its payout by about one-fourth, but investors should look at the bigger picture. As CEO Thomas Farrell explained in conjunction with July's dividend reduction announcement, "Our rebased dividend policy better reflects our revised operating and financial strengths, aligns with our best-in-class industry peers and allows us to grow our dividend much more rapidly than before."

Those operating revisions include the shedding of riskier, more volatile businesses, and a greater focus on more sustainable, predictable ones. Dominion is now out of the energy exploration and transportation industries, but it has beefed up its exposure to the renewable market. Most of all, it has sought out and acquired its way into markets where well-regulated rates allow for stable revenue and earnings.  

In other words, while the recent payout cut was in one sense a step back, current dividends aren't everything. The reconfigured company and its dividend will be much better for shareholders in the long run.

James Brumley has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends FedEx. The Motley Fool recommends CVS Health, Dominion Energy, Inc, and Waste Management. The Motley Fool has a disclosure policy.

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