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 Intel (Nasdaq: INTC) 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 Intel.

Factor

What We Want to See

Actual

Pass or Fail?

Size Market cap > $10 billion $106.1 billion Pass
Consistency Revenue growth > 0% in at least four of five past years 2 years Fail
  Free cash flow growth > 0% in at least four of past five years 3 years Fail
Stock stability Beta < 0.9 1.12 Fail
  Worst loss in past five years no greater than 20% (43.5%) Fail
Valuation Normalized P/E < 18 11.36 Pass
Dividends Current yield > 2% 3.7% Pass
  5-year dividend growth > 10% 14.5% Pass
  Streak of dividend increases >= 10 years 8 years Fail
  Payout ratio < 75% 30.6% Pass
       
  Total score   5 out of 10

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

Intel scores just five points, giving conservative investors only part of what they'd like to see from a stock. Although the tech giant has come through with unusually strong dividends for its industry, its stock has been extremely volatile, and the company's business hasn't provided the steady growth that investors desire.

Intel's processors have dominated the PC industry for decades, consistently outperforming rival Advanced Micro Devices (NYSE: AMD) in providing the backbone of computing power. Although Microsoft (Nasdaq: MSFT) recently announced that it would release a version of Windows compatible with processors from ARM Holdings (Nasdaq: ARMH), many believe that fears of the personal computer's demise are overblown.

Meanwhile, Intel is trying to allay fears that it's missing the next wave by entering the mobile market. But there, the company faces an unusual role of playing catch-up against a series of competitors using ARM's designs, including Broadcom (Nasdaq: BRCM) and Marvell Technology (Nasdaq: MRVL). To better compete in this market, Intel purchased Infineon's wireless chip unit. Qualcomm (Nasdaq: QCOM) has emerged as a dominant player in producing processors for mobile devices, largely thanks to its expertise in integrating its wireless chips with an application processor to create a smaller, more energy-efficient all-in-one solution.

All told, it's unclear whether Intel can successfully innovate its way into the next generation of computing. Conservative investors can expect its legacy PC business to keep producing healthy profits for some time -- profits which should support a robust dividend -- but its prospects for future growth look much more speculative. That's not the ideal combination for a retirement portfolio.

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.

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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 in this article. Intel and Microsoft are Motley Fool Inside Value picks. Motley Fool Options has recommended a diagonal call positions on Intel and Microsoft. The Fool has bought calls on Intel and owns shares of Intel, Marvell Technology, Microsoft, and Qualcomm. Motley Fool Alpha LLC owns shares of Microsoft. 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.