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3 Solid Stocks for a Winning Retirement Portfolio

By Robin Hartill, CFP® – Dec 29, 2020 at 10:30AM

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These three stocks are like gold for your retirement accounts.

Whether your retirement is decades away or you're already enjoying your senior years, the best stocks for your retirement portfolio are the ones you're confident you'll still want to own 10 or 20 years down the road. That means you'll want to choose blue-chip stocks that have a long history of building wealth for investors. Here are three stocks that can buy you a richer retirement.

1. Target

Target (TGT 3.34%) seems poised to reach Dividend King status next year. With a current yield of 1.55%, it's raised its dividend for 49 consecutive years. But Target's dividend isn't the only reason you should buy and hold this stock forever. Share prices are up 35% year to date thanks in large part to investments made long before the COVID-19 pandemic. Target is a stock you'll want to own forever because it has both a winning brick-and-mortar and e-commerce strategy.

The interior of a Target store in Gainesville, Va.

Image source: Target.

Target has long been known for getting shoppers to spend way more than they planned to when they visit a store, a phenomenon the internet has dubbed "The Target Effect." Make no mistake about it: Given its plans to add mini Ulta Beauty shops to about 100 of its locations on top of its existing partnerships with Walt Disney (DIS 2.07%) and Starbucks, it's clear Target is still banking on luring people deeper into its stores so they make more purchases.

But Target has also made key digital investments that make it easier for customers to limit their time in stores or bypass them altogether, which, not surprisingly, paid off during the pandemic. In the third quarter of 2020, Target's comp sales and revenue grew by 20.7%, bolstered mostly by a 155% increase in digital sales. Earnings per share according to generally accepted accounting principles (GAAP) for the third quarter were up 46% over last year.

What's especially noteworthy here is that 95% of Target's overall Q3 sales were fulfilled in-store -- whether by Target employees or shoppers for delivery service Shipt, which Target acquired in 2017. Target says the costs of fulfilling orders in-store are about 90% lower compared to doing so via a warehouse.

While Target has clearly benefited from pandemic shopping habits, it still has room to grow. It has just under 1,900 stores nationwide, compared to rival Walmart's more than 4,700 U.S. stores, and it continues to up its game in the grocery wars. 

Mickey Mouse at Walt Disney World in Lake Buena Vista, Fla.

Image source: Walt Disney World Resorts.

2. Disney

Walt Disney had a rough year due to COVID-19, as theme parks closed, production was halted, and cruises were docked indefinitely. The tumult of 2020 caused Disney to suspend its dividend payment for the first time in 64 years. In fiscal 2019, Disney had a $6.8 billion operating profit, compared to an $81 million operating loss for 2020. But investors aren't worried about the long-term future of the House of Mouse -- and you shouldn't be, either. As of Dec. 23, shares were trading at all-time highs of over $173.

Even while parks operate at limited capacity and cruises are unable to set sail, let's not forget that Disney has 120 million streaming subscribers worldwide on Disney+, ESPN+, and Hulu. Disney+ alone has 86 million subscribers, and CEO Bob Chapek expects that number to grow to 230 million by the year 2024. Plus, it's pretty likely that once the COVID-19 vaccine becomes available to the general public, people will be itching to get out of their houses and theme park attendance will surge again. 

Disney may be in store for another tough few months, but for long-term investors it will be a mere blip. If you thought Disney was a winning pick for your retirement portfolio a year ago, there's no reason to lose faith heading into 2021.

3. Procter & Gamble

Procter & Gamble (PG 0.84%) is about as safe a stock as they come. With a current yield of 2.31%, the corporation has 64 years of consecutive dividend increases on the books, giving it solid Dividend King status. Procter & Gamble has underperformed compared to the rest of the stock market year to date, delivering returns of 11.61% as of Dec. 23, compared to 16.19% for the S&P 500 index. Of course, that lackluster performance isn't especially surprising given that consumer staples tend to be good defensive stocks. After all, people don't run out and buy more laundry detergent or diapers just because the economy is booming.

But aside from its dividend history and the fact that it makes things people need, there are a few reasons to be optimistic about Procter & Gamble's future. The once-bloated company has gotten leaner in recent years, having shed nearly 100 brands since 2014 to focus on its core brands that were generating about 95% of profits. Plus, it's created a start-up incubator, P&G Ventures, to invest in products outside its current markets and offerings. Although it's been a latecomer to e-commerce, it's finally making strides in online sales, with digital sales up 50% for the quarter that ended Sept. 30.  

Obviously, Procter & Gamble isn't going to deliver the explosive growth of the FAANG stocks largely driving the S&P 500. But as long as it continues to modernize with the times, it's just the kind of stock you want for your retirement portfolio -- reliable both in good and bad times.

Robin Hartill, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks, Ulta Beauty, and Walt Disney and recommends the following options: short January 2021 $135 calls on Walt Disney, short January 2021 $100 calls on Starbucks, and long January 2021 $60 calls on Walt Disney. The Motley Fool has a disclosure policy.


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