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If You're Retired, Consider Buying These 5 Stocks

By Justin Pope – Sep 6, 2021 at 8:35AM

Key Points

  • Retired investors need to protect their wealth as much as they grow it.
  • The ideal retirement stocks pay reliable dividends, have dominant businesses, and produce steady growth.
  • In this low-interest rate environment, retirees can still thrive with a sound investment strategy.

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As an investor, retirement likely means you're looking for a combination of safety, income, and some growth potential in your portfolio. These stocks deliver in all three areas.

It's vital to protect your nest egg during your golden years when it's time to enjoy the fruits of a long career. But where are you going to keep your wealth? Banks these days offer little compensation for your funds, so you may turn to the stock market.

But if you're retired, you likely don't want to stress over risky stocks -- you want investments that offer just enough return to grow your money in retirement slowly without excessive volatility. These five blue chip companies could be just what you're looking for.

1. McDonald's

McDonald's (MCD 0.63%) is the world's largest publicly-traded fast-food chain with more than 39,000 locations worldwide. However, the company generates most of its revenue from the rent paid by the franchisees who operate its restaurants.

Elderly couple dancing together.

Image source: Getty Images. 

Fast food is cheap, quick, and the golden arches are an iconic brand across the planet, so McDonald's has thrived for decades through various economic environments. It pays a dividend that yields 2.2% as of this writing, and management has raised the payout for 46 years and counting.

Analysts expect McDonald's to grow its earnings per share at an 8% to 9% rate moving forward, so the stock offers solid growth to go along with its resilient business model.

2. Johnson & Johnson

Johnson & Johnson (JNJ 0.13%) is a healthcare conglomerate that sells a range of pharmaceutical drugs, medical devices, and consumer products. The business generated more than $20 billion in free cash flow in 2020, which helps fund a dividend that has been increased each of the past 59 years.

The current dividend yield is 2.4%, so holding shares of Johnson & Johnson beats a savings account handily. Its stacked balance sheet holds roughly $25 billion in cash, equivalents, and marketable securities, so the company has plenty of financial flexibility.

People need healthcare constantly, so business is steady for Johnson & Johnson, a leader in its industry. Analysts expect the business to grow earnings per share at a 7% to 8% rate moving forward.

3. Procter & Gamble

Procter & Gamble (PG 0.18%) manufactures and sells a wide variety of consumer staples and household products worldwide. These are products like shampoo, laundry detergent, and toothpaste -- items consumers buy every month, or "automatic buys" they don't think about.

The company turns $0.20 of every dollar of revenue into free cash flow, which amounted to $15.8 billion in its fiscal 2021. With that cash, Procter & Gamble pays a dividend that yields 2.4% on the current stock price.

It also has one of the longest dividend growth track records of any stock, a streak of increases that spans 65 years. Analysts expect the business to grow its earnings per share at a 7% rate moving forward, so investors are likely to see Procter & Gamble march along steadily.

4. 3M Company

3M Company (MMM 0.81%) is an industrial conglomerate that designs and sells roughly 55,000 products across virtually every industry globally. Its products range from adhesives and films to the Post-it notes found in cubicles worldwide.

Industrial companies can be cyclical, meaning their performance fluctuates with how the economy is doing. But 3M is so diversified that it handles the ups and downs of its end markets fairly well. For example, the COVID-19 pandemic hurt many of its end markets, but the company makes respirators (masks), which offset the decline of its other businesses.

Another top-notch dividend payer, 3M's dividend yields 3.1%, and management has raised the payout 63 years in a row. Analysts expect the company to grow earnings per share at a 9% to 10% rate moving forward.

5. Verizon Communications

Verizon Communications (VZ 0.26%) is a telecommunications company that operates the second-largest wireless network in the U.S. Smartphones have become a staple of our lives, making our phone bill a utility, something paid each month without question.

The telecom business in the U.S. is an oligopoly, meaning a select few companies control it. It costs many billions of dollars to build a network of cell towers, which heavily discourages competition from new entrants to the industry.

Verizon pays the most generous dividend of the companies on this list with the stock yielding 4.6%. The company has increased its payout for the past 17 years and could easily continue to do so since Verizon is expected to grow earnings per share between 3% and 4% each year moving forward.

Here's the bottom line

Retired investors can benefit from holding shares of these dominant companies in their respective fields with steadily growing dividends. These businesses have a long history of returning cash to shareholders and are expected to grow modestly but consistently long term.

You can still increase your wealth during your golden years -- it just requires a strategy that respects the risks of the market and focuses on blue chip companies with proven track records. 

Justin Pope has no position in any of the stocks mentioned. The Motley Fool recommends 3M, Johnson & Johnson, and Verizon Communications. The Motley Fool has a disclosure policy.

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Stocks Mentioned

McDonald's Stock Quote
$275.00 (0.63%) $1.73
Johnson & Johnson Stock Quote
Johnson & Johnson
$177.24 (0.13%) $0.23
Procter & Gamble Stock Quote
Procter & Gamble
$146.72 (0.18%) $0.27
3M Stock Quote
$129.04 (0.81%) $1.04
Verizon Communications Stock Quote
Verizon Communications
$39.02 (0.26%) $0.10

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

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