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 and then examine whether Corning (NYSE: GLW) 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 Corning.

Factor

What We Want to See

Actual

Pass or Fail?

Size Market cap > $10 billion $26.5 billion Pass
Consistency Revenue growth > 0% in at least four of five past years 4 years Pass
  Free cash flow growth > 0% in at least four of past five years 4 years Pass
Stock stability Beta < 0.9 1.37 Fail
  Worst loss in past five years no greater than 20% (59.8%) Fail
Valuation Normalized P/E < 18 12.18 Pass
Dividends Current yield > 2% 1.2% Fail
  5-year dividend growth > 10% 0.0% Fail
  Streak of dividend increases >= 10 years 0 years Fail
  Payout ratio < 75% 9.0% Pass
       
  Total score   5 out of 10

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

With just 5 points, Corning doesn't have quite everything that conservative investors would like to see in a stock. You might not think of the company as an innovator, but you'll find Corning's materials in many of the popular products that millions of people have bought lately.

Corning's roots come from glass. The company that helped Thomas Edison make his first light bulb has gone through several cycles of product innovation over the generations. Early in the last decade, Corning got the bulk of its sales from producing the fiber optic cable and other components that big telecom companies such as AT&T (NYSE: T) needed to build out and expand their voice and data networks.

More recently, though, Corning has focused on materials for displays, such as flat-panel TVs. Growth for its flagship product, which it sells to AU Optronics (NYSE: AUO) and LG Display (NYSE: LPL) for LCD televisions, has slowed to just 5%. But with companies including Microsoft (Nasdaq: MSFT), Apple (Nasdaq: AAPL), and Motorola Mobility (NYSE: MMI) signing on to use Corning's Gorilla Glass for their smartphones, prospects look bright.

The biggest challenge that Corning faces is translating those sales into earnings. In its most recent quarter, Corning's adjusted earnings actually fell 10% despite an excellent increase in overall revenue. As it innovates, the company needs to figure out how to boost profits to help shareholders.

For retirees and other conservative investors, Corning's constant reinvention of itself can make for a bouncy ride. Like many tech stocks, Corning's shares have seen plenty of volatility recently. But if you can afford to take the risk, Corning's growth story may make its stock a worthy addition to 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. You can follow him on Twitter. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, AT&T, and Apple, as well as creating a bull call spread position on Apple. We Fools don't 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.