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3 Top Stocks for Retirees

By Demitri Kalogeropoulos - Updated Feb 23, 2021 at 8:14PM

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These stocks offer income plus a good chance of market-thumping growth.

Once you're retired, your financial priorities change. You'll focus more on preserving as opposed to accumulating assets, so your portfolio needs to reflect that more cautious posture.

But retirement can last for several decades, which means you have plenty of time to invest in individual stocks in addition to more stable financial instruments like bonds and index funds. With that in mind, let's look at why Constellation Brands (STZ -0.40%), PepsiCo (PEP 0.69%), and eBay (EBAY 1.43%) could help lift your retirement portfolio.

A smiling older woman checks her smartphone.

Image source: Getty Images.

1. Constellation Brands

Alcohol is considered a consumer staple product, meaning demand usually rises through a wide range of economic environments. Constellation Brands illustrated that stability during 2020 as sales rose 3%, even as consumers drastically shifted the way they purchase beer and wine.

That boost included an 8% increase in beer sales that translated into market-share growth against rivals like Anheuser Busch InBev and Molson Coors. Constellation Brands' focus on premium imports, spanning brands like Modelo and Corona, allowed it to keep growing while these global conglomerates shrank. Its hard-seltzer release added a new niche to its portfolio, too.

Constellation Brands isn't growing as quickly as Boston Beer, but the business brings other factors -- like a larger portfolio and higher profit margins -- that retirees will appreciate. Gushing cash flow also means you can expect quick dividend growth, even as the company makes bets in areas like recreational marijuana in the years ahead.

2. PepsiCo

PepsiCo looks like a nearly ideal investment today. The company just logged 5% growth in 2020 as its diverse snack and beverage portfolio helped it outperform peers from Coca-Cola to Hershey. The Dividend Aristocrat is expected to announce its 49th consecutive annual payout raise in just a few weeks, too. And Pepsi's 2021 growth outlook trounces its rivals.

On the downside, Pepsi's profitability is lagging as management pours resources into fixing manufacturing bottlenecks and tilting the business more toward growth. That financial priority will also mean far lower stock-buyback spending this year.

But CEO Ramon Laguarta and his team have demonstrated how that growth posture can reward investors with steady market-share gains and robust cash flow. Profitability hikes should eventually follow those wins, boosting shareholders' returns even higher.

3. eBay

Retirees have many great options when seeking exposure to online retailing, but eBay, one of the top global players, is among the most attractive today. The e-commerce marketplace benefited from surging demand during the pandemic, just like its peers did. But eBay's slimmer cost profile allowed it to convert a bigger proportion of those sales to earnings. Operating income jumped 68% last year.

EBAY Operating Income (TTM) Chart

EBAY Operating Income (TTM) data by YCharts.

After reinvesting in growth initiatives, eBay directed most of that windfall right back to shareholders through stock buybacks in 2020. Its recent 13% dividend increase confirms management's commitment to that cash-return channel, too.

Fiscal 2021 will no doubt be volatile as growth rates begin going up against year-ago spikes from the early days of the pandemic. The good news is that eBay's middleman selling approach shifts much of that cost to other parties, allowing shareholders to benefit from e-commerce growth without taking on too much risk. That's an attractive financial trade-off, especially for investors at or near retirement.

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Stocks Mentioned

Pepsico, Inc. Stock Quote
Pepsico, Inc.
$168.97 (0.69%) $1.15
Constellation Brands, Inc. Stock Quote
Constellation Brands, Inc.
$243.03 (-0.40%) $0.97
eBay Inc. Stock Quote
eBay Inc.
$44.81 (1.43%) $0.63
The Coca-Cola Company Stock Quote
The Coca-Cola Company
$64.07 (0.08%) $0.05
Molson Coors Beverage Company Stock Quote
Molson Coors Beverage Company
$54.33 (1.12%) $0.60
The Boston Beer Company, Inc. Stock Quote
The Boston Beer Company, Inc.
$333.41 (3.19%) $10.29
The Hershey Company Stock Quote
The Hershey Company
$211.43 (-0.95%) $-2.02
Anheuser-Busch Companies, LLC Stock Quote
Anheuser-Busch Companies, LLC

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

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