Many younger investors tend to chase the market's highest-growth stocks. That strategy makes sense if you still have decades to go before you retire, since those speculative plays might generate massive gains for investors who can stomach a lot of near-term volatility.
But if you're an older investor who has already retired, you shouldn't chase those high-growth stocks, which could suffer multiyear declines before delivering multibagger gains. Instead, you should focus on preserving your capital in more conservative stocks that generate steady long-term income.
Here are three stocks that fit that description: Philip Morris International (PM 1.35%), PepsiCo (PEP 0.80%), and Enterprise Products Partners (EPD -0.12%).
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1. Philip Morris International
Philip Morris International, one of the world's largest tobacco companies, was spun off from Altria in 2008. After that split, PMI only sold its products overseas as Altria stayed in the U.S. market. PMI aimed to expand in overseas markets with higher smoking rates, while Altria tried to streamline its shrinking domestic business.
PMI might initially seem like a wobbly investment because smoking rates are still dropping across the world. Yet its stock has rallied nearly 210% since its public debut, and it's generated a total return of 608% after including its reinvested dividends.
To offset its declining shipments of traditional cigarettes, PMI consistently raised prices, cut costs, and expanded its portfolio of smoke-free products -- which include its Iqos heated tobacco products, e-cigarettes, and its Zyn nicotine pouches. In its latest quarter, it generated 41% of its revenue and 42% of its gross profit from smoke-free products. The company is also well insulated from tariffs because it produces and sells most of its products overseas.
From 2024 to 2027, analysts expect PMI's earnings per share (EPS) to grow at a robust compound annual growth rate (CAGR) of 26%. It's raised its dividend every year since its spin-off from Altria, and its forward dividend yield of 3.7% should become much more appealing as interest rates decline. Its stock looks like a bargain at 19 times next year's earnings, and it should remain a reliable income play for the next few decades.
2. PepsiCo
PepsiCo, one of the world's leading beverage and packaged food makers, is a Dividend King that has raised its payout for 53 consecutive years. It currently pays a forward yield of 3.8%, and its stock looks cheap at 17 times forward earnings.
Like PMI, PepsiCo might seem a wobbly investment because health-conscious consumers aren't drawn to sugary sodas and processed snacks. But over the past few decades, PepsiCo expanded its beverage portfolio with healthier and non-carbonated drinks as it refreshed its flagship sodas with new flavors, smaller serving sizes, and sugar-free versions. Its packaged food brands -- which include Frito-Lay, Quaker Foods, and Pioneer Foods -- also updated their older products with healthier and more innovative versions.
Over the past 10 years, PepsiCo's stock rallied 55% and generated a total return of nearly 110%. From 2024 to 2027, analysts expect its EPS to grow at a CAGR of nearly 8% as it overcomes its recent packaged food recalls and prioritizes the growth of its higher-value brands. Its gross margin should also stabilize as inflation gradually cools. It isn't an exciting investment, but it's a stable consumer staples play that is a great fit for conservative income investors.
3. Enterprise Products Partners
Enterprise Products Partners is a midstream energy infrastructure company that operates more than 50,000 miles of pipeline across 27 states. It generates most of its revenue by charging upstream extraction companies and downstream refining companies fees for using its pipes. That toll-road business model insulates it from the volatile commodity market, since it only needs the natural gas and crude oil to keep flowing through its pipelines to generate stable profits. So even as those commodity prices went through some wild swings in recent years, the company continued to expand its pipelines across the Permian Basin, the Neches River, Morgan's Point, and other resource-rich locations.
The company also structures itself as a master limited partnership (MLP), which blends the tax advantages of a private partnership with the liquidity of a publicly traded stock. By consistently blending its own profits with a return of capital, Enterprise Products pays a high forward yield of 7.2% -- and it's raised distributions annually for 28 consecutive years. Over the past 10 years, its stock only rose 5% -- but the company delivered an impressive total return of more than 110%.
From 2024 to 2027, analysts expect its earnings per unit (EPU) to grow at a steady CAGR of 4%. It still looks like a bargain at 11 times next year's EPU -- and it's a simple way for retirees to generate a stable stream of reliable income through the next bear and bull markets.
