Whenever I decide on a stock, my mindset is that I'll stay invested in it for nothing short of a decade. Ideally, you're investing in great companies you feel comfortable holding on to until retirement. That's a good way to measure your confidence in the company and the strength of its business model.
The key to investing for retirement is often consistency through the ups and downs and trusting the long-term potential. Here are three stocks I'm adding to my retirement portfolio in March. One is dividend-focused, one is growth-focused, and one is an exchange-traded fund (ETF) that covers a lot of ground.
1. AT&T
AT&T (T 1.02%) is a company whose recent woes have been painful for many of its investors. Surprisingly, the past six months have been a breath of fresh air, with the company showing some positive signs of a potential turnaround.
Despite halving its dividend in early 2022, AT&T still boasts one of the highest dividend yields in the S&P 500. Its current dividend yield is just under 6.5%, making it highly attractive for investors looking for well-above-average dividend income. This yield is over four times higher than the S&P 500's.
Many have questioned the stability of AT&T's dividend, particularly because of the company's high long-term debt. However, I think recent financial performance has eased many of those concerns. AT&T's debt is undoubtedly worth the criticism, but its free cash flow shows it can cover debt and dividend obligations.
T Free Cash Flow Per Share data by YCharts
The telecom industry has become crucial for daily American life. From personal communication to business operations to other vital services, telecom companies provide a lot of the infrastructure that powers our digital economy and connects our society. That's why I believe AT&T's long-term investment appeal is strong.
The company's recent stock price woes don't reflect its business importance. And with an ultra-high dividend yield, I feel comfortable waiting for it to work out its kinks while earning steady dividend income for retirement.
2. Microsoft
There isn't a tech company that I currently trust more than Microsoft (MSFT 1.82%). It's been on a roll lately and now stands as the world's most valuable public company, with a market cap of over $3.1 trillion (as of March 20).
Artificial intelligence (AI) has dominated tech talk for the past year or so, and few companies (if any) have capitalized on the developments, like Microsoft. Its strategic partnership with ChatGPT creator OpenAI has put it in a position to strengthen its already rock-solid product and service ecosystem.
Microsoft's business covers a wide range, and it's a top player in many technology industries, such as enterprise software, cloud computing, and personal computing. The size of Microsoft's ecosystem all but ensures longevity because it reduces dependency on single industries that may experience declines or high volatility. This isn't the case for many of its big tech competitors that rely heavily on a single product or service.
The diverse business model has also worked wonders for Microsoft's financials, especially in the past five years.
MSFT Revenue (Quarterly) data by YCharts
Microsoft's strong financial standing allows it to reward investors with dividends and stock buybacks and make investments to ensure it stays ahead of the curve on the latest technological advancements. That's what you want from a company you plan on holding on to until retirement.
3. Vanguard S&P 500 ETF
If there's any stock that I routinely add to my retirement portfolio, no matter what, it's the Vanguard S&P 500 ETF (VOO 1.00%).
Although the Vanguard S&P 500 ETF only contains large-cap stocks, it's as close to a one-stop shop as you'll need for your retirement account portfolio. Specifically, it has the trifecta that checks off key investing boxes: diversification, filled with blue chip stocks, and low cost.
Diversification-wise, the ETF contains companies from all major sectors. Since it's market cap-weighted, seven of the top 10 stocks in the fund are tech companies (six companies total, as Alphabet has two share classes represented). Still, it does a good job of representing the greater U.S. economy. As the U.S. economy goes, so does the S&P 500, more often than not, and the U.S. economy is one of the surest bets you can make -- albeit not foolproof.
Having a broad ETF like the Vanguard S&P 500 ETF as the staple of your retirement portfolio is a great way to build a foundation on which to build and complement other individual stocks.
