Could PepsiCo give your retirement portfolio some pep? Image source: PepsiCo.
Even after you retire, it makes sense to have some of your money invested in stocks. You can't afford to take outsized risks with too much of your retirement money, though, so picking companies that provide the right combination of stability and growth prospects is important.
Below, you'll learn about three consumer-oriented stocks that could fit the bill for conservative investors putting together a stock portfolio for their retirement years.
Tamara Walsh: The best retirement stocks are those with reliable dividends that continue to grow over time. Enter PepsiCo (PEP -0.58%). The world's largest snack company has paid a dividend every year since 1952, and it has increased its payout for the past 43 consecutive years. This earns Pepsi the coveted title of Dividend Aristocrat. Today, the soda and snack giant pays investors an annual cash dividend of $2.81 per share.
True, Pepsi's dividend yield of 2.87% is modest compared to high-yielding telecom stocks. However, it is still above both the S&P 500 yield of just 2.26% and markedly above the beverages industry median yield of 1.98%. Perhaps, more importantly, Pepsi offers investors both low risk as well as high dividend growth. In fact, the conglomerate expects to return upwards of $9 billion to shareholders this year through dividends and share repurchases.
Pepsi is a winning stock for retirement portfolios because investors can rest easy knowing the company will be able to continue growing its payout for many years to come. After all, Pepsi's Frito-Lay snack division alone now boasts 22 brands that each generate annual sales north of $1 billion. This cash-flow-rich business should therefore continue rewarding income investors for decades to come.
Coach, like every retailer at some point during its existence, hit its rough patch. Shares of the accessible luxury accessories retailer have fallen by about 65% since March 2012 as competition in the luxury accessory space has heated up, and growth in select foreign markets has cooled a bit.
However, Coach has initiatives in place that should put its short-term problems in the rearview mirror, and once again emphasize its strengths. To begin with, Coach is clamping down on discounting. Although it could certainly go toe-to-toe with competing accessory brands, that's not the Coach way. Instead, Coach relies on preserving the quality of its image by not cheapening the brand through discounting. A consistent image should go a long way toward supporting its brand, forging emotional connections, and driving sales growth.
Another important aspect of growth is to focus on high-growth opportunities in Asia and Europe. Asia remains Coach's bread and butter growth opportunity, with a burgeoning middle and upper class in countries like China hungry for brand-name luxury products. What Coach's CEO, Victor Luis, sees as a major opportunity is the push into Europe, where consumers are only just being introduced to American luxury styles.
Coach has also been a strong supporter of improving shareholder value through dividends and share buybacks. A $1.5 billion buyback program announced in 2012 and its current yield of just shy of 5% imply that management has the interests of investors front and center.
If you're looking for a consumer goods stock to sock away in your retirement portfolio, you could certainly do much worse than Coach.
Dan Caplinger: One of the most confusing things many major consumer goods stocks have had to face in recent years is the strength of the U.S. dollar. For Procter & Gamble (PG 0.12%), currency impacts have played a major role in holding back earnings growth, and that has contributed to the perception that the stock is overvalued.
When you first look at P&G, the stock's trailing earnings multiple of nearly 30 seems intimidatingly high, even for a company of its caliber. A dividend yield of 3.4% makes many dividend investors interested in the stock, and Procter & Gamble's ability to hold up well in economic downturns gives it some added value as well.
Yet beyond Procter & Gamble's impressive stable of billion-dollar brand names, future earnings growth appears to still be on track, with investors expecting the company to post better than $4 per share earnings within the next couple of years. That puts forward multiples in the high teens, and while that's still somewhat lofty, P&G has the ability to rebound quickly once the dollar stops strengthening. Combined with its worldwide reach, Procter & Gamble makes for a must-have stock for long-term stability in retirement portfolios.
