Even in your 70s, you'll probably want some of your portfolio invested in stocks, or stock-based funds. After all, a typical 70-year-old male can expect over 14 years of life ahead, and a typical 70-year-old female can expect over 16 years of life. That's a long future ahead of you, and you'll want to protect the long-term purchasing power of your money after considering taxes and inflation -- a role that stocks can frequently fill.
Still, not every stock deserves a place in your portfolio in your 70s. Since you have less time to recover from losses and are potentially living off your portfolio instead of a salary, you'll want stocks with both a proven track record of success and the potential to continue to thrive. While there are no guarantees in investing, stocks like these three, with solid balance sheets, strong dividend policies, and reasonable valuations, provide the right balance to improve your chances as a 70-something investor.
The building and aerospace titan that made skyscrapers possible
More than anything else, two inventions made it possible to build the skyscrapers that are central to our urban landscapes: air conditioning and elevators. United Technologies (NYSE:RTX) is the company behind Otis Elevators and Carrier air conditioning, two of the strongest brands in those businesses. As if that weren't enough, United Technologies also owns Pratt and Whitney aircraft engines and designs, and manufactures other aerospace systems, as well.
By providing that strong foundation of our urban lives, United Technologies has a solid foundation that it's leveraged to provide its owners a dividend that has increased for around 24 years. While its dividend has been regularly increasing, the company tends to increase it every five quarters instead of at the more typical four-quarter pace. With a yield of around 2.4% and a payout ratio around 40% of earnings, United Technologies looks likely capable of continuing that trend as its earnings grow.
Speaking of that earnings growth, United Technologies is expected to be able to increase its earnings by around 5.6% annualized over the next five or so years, which should outpace inflation. Trading at around 17 times its expected forward earnings, United Technologies appears fairly priced for that modest expected growth.
Supported by a balance sheet with a debt-to-equity ratio below 0.9 and a current ratio above 1.3, United Technologies looks capable of withstanding a typical economic storm. That -- along with their climate-control systems -- should help its investors sleep well at night, even if things don't work out entirely in line with expectations.
The high-tech value stock that pervades our digital world
Cisco Systems (NASDAQ:CSCO) is best known for the routers, switches, and other infrastructure that connects much of the Internet. What you may not know, however, is that Cisco Systems also offers collaboration, security, analytics, and network-storage solutions. Those other product lines help Cisco Systems continue to thrive, despite the fact that the Internet it helped build already reaches most points around the world.
From a value perspective, Cisco Systems trades at less than 14 times its expected forward earnings, and it's expected to grow those earnings by better than 10% annually over the next five or so years. That combination makes it attractively priced, particularly when the overall S&P 500 trades above 19 times its expected forward earnings.
Cisco Systems also sports a strong balance sheet, with more liquid assets than debt and a current ratio above 3. That gives it the flexibility to handle a nasty rough patch in the market, as well as giving it the opportunity to acquire other businesses, as needed, to enhance its portfolio.
On top of that, Cisco Systems sports a yield above 3.4% and pays out around 58% of its earnings in the form of its dividend. The company has increased its dividend every year since it instituted the payout in 2011. While it likely won't increase its dividend at as furious a pace in the future as it has in the past, it does look capable of continuing to increase its dividend as its earnings grow over time.
A financial business that increased its dividend during the financial crisis
Money management titan T. Rowe Price (NASDAQ:TROW) bucked the trend among many large financial institutions by continuing to increase its dividend during the financial crisis. That enabled it to maintain a track record of dividend increases that now reaches three decades in duration. T. Rowe Price's dividend now sports a respectable 2.5% yield, yet only represents about 39% of its earnings.
With earnings expected to grow by around 11.4% annualized over the next five or so years, T. Rowe Price looks like it may very well be able to continue its trend of raising that dividend. That's especially true given its pristine balance sheet with over $1.5 billion in net cash and current ratio above 3. That balance sheet gives it a very strong financial foundation to protect its ability to ride out economic turmoil, which at least partially explains how its dividend survived the financial crisis.
Even with that strength and expected long-run growth rate, T. Rowe Price trades at around 16.4 times its expected forward earnings, making it a relative bargain for such a high-quality business.
Your chance for stock-like returns in your 70s
Each of these companies share the key characteristics of solid balance sheets, strong dividend policies, and reasonable valuations that make them worth considering for a 70-something investor. By owning shares in the stock portion of your portfolio, you give yourself a fighting chance to keep your money growing, to help maintain your ability to stay ahead of inflation in your golden years.