Retirement investing is all about balancing your long-term needs with your near-term ones. As the economy slows and the market falls due to the measures in place to tamp down on the spread of the coronavirus, that need for a balance becomes crystal clear. Money you need within the next few years does not belong in stocks, and tools like investment-grade bond ladders are much better suited for meeting those needs.
For money that you don't intend to spend for five or more years, however, stocks can still play a role in delivering the long-term growth you'll need to help your money last as long as your retirement does. Particularly in today's environment, it's important to have that long-term perspective with your stocks and to look for companies that look like they have the staying power to get you to that long-term goal. With that in mind, here are three stocks to consider on your path toward a better retirement.
North America's largest energy infrastructure titan
Even as we shelter in place and avoid unnecessary travel, the lights and heat have stayed on, and delivery trucks can still get the fuel they need to bring essential materials and products to market. Canada-based energy distribution giant Enbridge (ENB 0.89%) plays a key role in making that happen, thanks to its network of oil and natural gas pipelines that crisscross the continent.
That critical infrastructure role makes it likely that Enbridge will continue to operate during the crisis and receive sufficient revenues to cover the costs of operating and maintaining those pipelines. In addition, the company reported 648 million Canadian dollars ($448 million) in cash and a total list of current assets topping CA$8.8 billion ($6 billion) in its last earnings report.
That solid balance sheet helps it with the financial flexibility it needs to adapt to an economic slowdown that may temporarily reduce the volume of energy flowing through its pipelines. Even then, chances are that energy producers will continue to use Enbridge's pipelines while cutting alternatives like trucks or trains, as pipelines generally offer lower-cost ways to transport their energy.
Despite that strength, at its recent price of $25.63 per share, Enbridge's stock is well off the highs above $42 it set in February before the crash started. Patient investors can potentially get rewarded with both a rebound in share price and the dividends that the company indicated were covered in a presentation it gave this March.
An insurance company with a "rock solid" balance sheet
Prudential Financial (PRU -0.04%) cares a great deal about its financial strength. It cares so much, in fact, that it has used the Rock of Gibraltar as its corporate symbol for over a century. That manifests itself in a balance sheet with over $390 billion in bonds and $16 billion in cash and equivalents, with a net equity position above $60 billion. In insurance company terms, that translates to "a lot can go wrong above and beyond what it's planning for, and the company would still end up OK."
Yet despite that very strong equity position, the company's shares recently traded hands at such a low level that it implied you could buy the entire business for less than $17 billion. At current levels, the market is already pricing in a lot of bad news above and beyond the bad news that insurance companies typically face.
Remember that the company has two large business lines that counterbalance each other a bit. It sells life insurance and retirement annuities. The life insurance payouts go to the estates of people that pass away, while the retirement annuity payouts go to people who live long, healthy lives in retirement. Not to be too macabre about it, but if Prudential's death payouts do exceed expectations due to coronavirus, chances are that it will see some offsetting help from reduced annuity costs.
Prudential looks well positioned to be a likely survivor of the coronavirus mess. Assuming it is, investors who buy during the depths of the market's panic are setting themselves up for a potentially strong reward as things begin to return to normal over time.
Do you plan to stop eating because of coronavirus?
Like much of the market, Tyson Foods (TSN 2.90%) has seen its shares tank since mid-February. Unlike many food-related businesses, however, Tyson has the ability to continue operating and focus its production to where demand remains strong -- supermarkets. That gives it a source of continuing revenue even as the coronavirus mitigation efforts shut down restaurants, bars, and other out-of-home ways to get meals.
In addition to the fact that it still has a clear source of revenue to get it through the immediate crisis, Tyson Foods has a strong enough balance sheet to help it manage any near-term disruption it does face. It has a debt-to-equity ratio below 0.9 and a current ratio above 1.3. Together, those two facts indicate that it hasn't over-leveraged itself and it expects enough cash coming its way to cover its near-term obligations.
Looking beyond the near-term crisis, analysts expect the company to earn $7.16 per share in 2020, and it is expected to post modest growth over time beyond that point. At a recent price of $53.62, it's available at around 7.5 times those anticipated next-year earnings. That's a reasonable price to consider paying for a company that has both a decent revenue stream during the crisis and a path to growth once it passes.
With a balanced approach, you can still plan a decent retirement
While it's hard to keep a long-term focus while the world appears to be collapsing around you, knowing the difference between your long-term needs and your short-term ones can help you achieve both. Any solid retirement plan balances what you need today and tomorrow with what you need five to ten years from now and beyond.
By knowing which type of investments go in which part of your plan, you put yourself in a better position to bargain hunt during the market's panic. That, more than anything else, can help you potentially find the greatest stocks for the long-term part of your plan to get you to and through a better retirement.