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 Statoil (NYSE: STO) 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 Statoil.

Factor

What We Want to See

Actual

Pass or Fail?

Size Market cap > $10 billion $91.8 billion Pass
Consistency Revenue growth > 0% in at least four of past five years 4 years Pass
  Free cash flow growth > 0% in at least four of past five years 2 years Fail
Stock stability Beta < 0.9 0.64 Pass
  Worst loss in past five years no greater than 20% (45.1%) Fail
Valuation Normalized P/E < 18 5.99 Pass
Dividends Current yield > 2% 4% Pass
  5-year dividend growth > 10% 11.7% Pass
  Streak of dividend increases >= 10 years 0 years Fail
  Payout ratio < 75% 50.1% Pass
       
  Total score   7 out of 10

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

Statoil scores seven points, showing that it has a lot of what conservative investors are looking for from a stock. The oil company isn't as well-known as some of its larger rivals, but it combines healthy income for shareholders with some good prospects for future growth.

Norway-based Statoil is an energy producer with a major presence throughout Scandinavia and the northern part of Eastern Europe, with some Russian exposure as well. As it turns out, Statoil's home turf includes some interesting potential new energy plays. Shale gas, which has taken off in the U.S., is also seen as a possibility in Poland, with Halliburton (NYSE: HAL) and Schlumberger (NYSE: SLB) having worked on shale wells last year.

But Statoil isn't just staying close to home. Pairing up with other oil and gas giants like Chesapeake Energy (NYSE: CHK) in the Marcellus and Talisman Energy (NYSE: TLM) in the Eagle Ford shale play, Statoil is doing its best to become a global player in energy.

Like other energy companies, Statoil has a healthy payout right now. Unfortunately for U.S. investors accustomed to regular quarterly dividends, Statoil makes payouts annually. For a while, those dividends varied based on earnings rather than staying stable over time, but the company has moved away from a direct link between income and dividend payouts. Statoil's dividends are now much larger than they were five years ago, but they've actually fallen in the past couple of years.

Statoil is a good energy stock if you want to diversify beyond the better-known major oil companies. With exposure to rising oil prices along with a bright future from new unconventional energy sources, Statoil could make a good component of a retiree's stock 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. Statoil is a Motley Fool Income Investor recommendation. The Fool owns shares of Schlumberger. Motley Fool Alpha LLC owns shares of Chesapeake Energy. 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.