Now more than ever, a comfortable retirement depends on secure, stable investments. Unfortunately, the right stocks for retirement won't just fall into your lap. Let's figure out what makes a great retirement-oriented stock, then examine whether China Mobile (NYSE: CHL) has what we're looking for.

The right stocks for retirees
With decades to go before you need to tap your investments, you can take greater risks, weighing the chance of big losses against the potential for mind-blowing returns. But as retirement approaches, you no longer have the luxury of waiting out a downturn.

Sure, you still want good returns, but you also need to manage your risk and protect yourself against bear markets, which can maul your finances at the worst possible time. The right stocks combine both of these elements in a single investment.

When scrutinizing a stock, retirees should look for:

  • Size. Most retirees would rather not take a flyer on unproven businesses. Bigger companies may lack their smaller counterparts' growth potential, but they do offer greater security.
  • Consistency. While many investors look for fast-growing companies, conservative investors want to see steady, consistent gains in revenue, free cash flow, and other key metrics. Slow growth won't make headlines, but it will help prevent the kind of ugly surprises that suddenly torpedo a stock's share price.
  • Stock stability. Conservative retirement investors prefer investments that move less dramatically than typical stocks, and they particularly want to avoid big losses. These investments will give up some gains during bull markets, but they won't fall as far or as fast during bear markets. Beta measures volatility, but we also want a track record of solid performance as well.
  • Valuation. No one can afford to pay too much for a stock, even if its prospects are good. Using normalized earnings multiples helps smooth out one-time effects, giving you a longer-term context.
  • Dividends. Most of all, retirees look for stocks that can provide income through dividends. Retirees want healthy payouts now and consistent dividend growth over time -- as long as it doesn't jeopardize the company's financial health.

With those factors in mind, let's take a closer look at China Mobile.

Factor

What We Want to See

Actual

Pass or Fail?

Size Market cap > $10 billion $179.9 billion Pass
Consistency Revenue growth > 0% in at least four of five past years 5 years Pass
  Free cash flow growth > 0% in at least four of past five years 5 years Pass
Stock stability Beta < 0.9 0.65 Pass
  Worst loss in past five years no greater than 20% (41.7%) Fail
Valuation Normalized P/E < 18 11.88 Pass
Dividends Current yield > 2% 4.4% Pass
  5-year dividend growth > 10% 19.6% Pass
  Streak of dividend increases >= 10 years 6 years Fail
  Payout ratio < 75% 42.0% Pass
       
  Total score   8 out of 10

Source: Capital IQ, a division of Standard and Poor's. Total score = number of passes.

China Mobile scores an impressive eight points. With a strong dividend, consistent revenue and free cash flow growth, and a reasonable valuation, just about the only thing conservative investors have to fear from the stock is the volatility inherent in the Chinese stock market right now.

China Mobile is the world's largest mobile phone provider, with 600 million subscribers and a market share of nearly 70%. The company isn't entirely free of competition, with China Unicom (NYSE: CHU) and China Telecom (NYSE: CHA) also putting up a fight, especially in the major-city markets of Beijing and Shanghai. But with about half a billion people still without mobile phones, largely in rural markets where China Mobile has a dominant advantage, the company still has room for growth.

Interestingly, though, China Mobile is looking beyond its core business. Earlier this year, the company teamed up with China's government news agency to launch its Panguso.com Internet portal. The move challenges Baidu (Nasdaq: BIDU) and SINA (Nasdaq: SINA). While the focus of Panguso.com right now is search, it could reflect a desire from the Chinese government to clamp down on the popularity of microblogging -- an area both Baidu and SINA have aggressively moved in to.

Despite the political risks, China Mobile has demonstrated the same attractive characteristics that many telecom companies give investors. For retirees and other conservative investors seeking a healthy combination of current income and growth potential, China Mobile is definitely worth taking a closer look at.

Keep searching
Finding exactly the right stock to retire with is a tough task, but it's not impossible. Searching for the best candidates will help improve your investing skills, and teach you how to separate the right stocks from the risky ones.

Add China Mobile to My Watchlist , which will aggregate our Foolish analysis on it and all your other stocks.

If you want to retire rich, you need to be confident that you've got the basics of your investment strategy down pat. See if you're on track by following the 13 Steps to Investing Foolishly.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. Motley Fool newsletter services have recommended China Mobile, Sina, and Baidu. The Motley Fool owns shares of China Mobile. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.