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 Syngenta (NYSE: SYT) 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 Syngenta.


What We Want to See


Pass or Fail?

Size Market cap > $10 billion $28.2 billion Pass
Consistency Revenue growth > 0% in at least four of five past years 5 years Pass
  Free cash flow growth > 0% in at least four of past five years 4 years Pass
Stock stability Beta < 0.9 0.33 Pass
  Worst loss in past five years no greater than 20% (24.9%) Fail
Valuation Normalized P/E < 18 19.65 Fail
Dividends Current yield > 2% 3.1% Pass
  5-year dividend growth > 10% 22.8% Pass
  Streak of dividend increases >= 10 years 1 year Fail
  Payout ratio < 75% 44.8% Pass
  Total score   7 out of 10

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

With seven points, Syngenta gives conservative investors much of what they like to see. A strong market for agricultural products has helped the company make impressive dividend payouts recently, and steady growth has kept long-term shareholders happy.

Syngenta makes a number of products that the farming industry depends on. Its seed division competes against DuPont (NYSE: DD) and Monsanto (NYSE: MON), and it also produces chemical pesticides to help improve crop yields.

Recent trends have helped Syngenta immensely. High prices of food and other crops have given farmers more disposable income, thereby boosting their ability to invest more to enhance their productivity. Especially given the increased demand for fertilizer and its direct impact on farmland efficiency, Mosaic (NYSE: MOS) and PotashCorp (NYSE: POT) have shared in the spoils of higher food prices. But Syngenta definitely isn't getting left out.

What may take retirees and other conservative investors by surprise, though, is Syngenta's variable dividend policy. From year to year, dividends can differ greatly . That's different from DuPont and Dow Chemical (NYSE: DOW), which have stable, regular quarterly payments, but you can't argue with the huge payout growth over the past five years. Unless you think the trend toward higher food demand is set to reverse itself, Syngenta would make a smart 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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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.