Please ensure Javascript is enabled for purposes of website accessibility

Celebrate Your Retirement by Purchasing These 3 Stocks

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you're retired, here are three stocks that can provide you with income and growth, while still letting you sleep at night.

Photo: Flickr/Steven Depolo.

When you retire, chances are that your investment priorities will change. You'll no longer care as much about growth as you will about generating income and making sure your nest egg is secure. With that in mind, here are three stocks our contributors recommend for retirees.

Todd Campbell: It doesn't matter if your plans to celebrate retirement include hiking mountain vistas or sipping espresso in Paris cafes -- the last thing you'll want to do is worry about your portfolio.

Although there's no such thing as an entirely worry-free investment, one investment option that may allow you to fret less is Invesco's PowerShares S&P 500 High Dividend Low Volatility Portfolio (SPHD 0.41%).

This ETF invests in income-producing stocks that aren't as prone to the type of wild swings that could keep you up at night. For example, its 10 biggest holdings make up about a quarter of its portfolio, and those holdings include steady-eddy companies such as AT&T.

Because 80% of its portfolio is made up of mid- and large-cap stocks that pay dividends, the S&P 500 High Dividend Low Volatility Portfolio ETF also offers retirees an attractive 3.9% dividend yield. Given the chance to worry a bit less while you're taking in the Grand Canyon or Eiffel Tower, this could be the perfect investment to consider owning while celebrating your golden years.

Brian Feroldi: Anyone in retirement should constantly be looking for ways to generate income from his or her portfolio, and one smart way is by buying income-producing stocks. One to consider is Brookfield Infrastructure Partners (BIP 1.28%), a master limited partnership that owns a variety of stable, cash-producing infrastructure assets that operate in either regulated industries or under long-term contracts. That lineup provides the company with predictable, recurring revenue, allowing investors to sleep well at night even when the markets go crazy.

So what kind of infrastructure does Brookfield own? It's a mixture of incredibly boring but mission-critical assets such as railroads, ports, electricity towers, and telecommunications infrastructure. The company specializes in buying or building key infrastructure assets that produce strong cash flows all over the world, and Brookfield currently operates on five continents.

The reason I like Brookfield so much is its top-notch management team. It has a history of investing in distressed markets, which lets it pick out top-quality assets for bargain prices. That approach has allowed the company to generate strong returns on capital, taking its long-term investors on a profitable ride.

BIP Chart

For example, during the Greek debt crisis the company went shopping in Europe, buying toll roads, ports, gas distribution systems, and more. More recently, it teamed up with energy infrastructure giant Kinder Morgan (KMI 1.74%) to jointly acquire the 53% of the Natural Gas Pipeline Company of America they didn't already own. Brookfield believes the company will be able to grow organically in the coming years as projects come online, which should help power its own profits higher in the coming years.

Brookfield's shares currently yield 5.6%, and management believes that it should be able to grow its distribution by 5% to 9% annually. If the company can do so -- and history suggests that it can -- then investors who buy today should realize a total return in the double digits. That's an attractive proposition, which is why I think this is a great stock for retirees to buy.

Matt Frankel: Like Todd, I also have an ETF in mind that's perfect for retirees: the SPDR S&P Dividend ETF (SDY 0.37%).

This fund tracks the performance of the S&P High Yield Dividend Aristocrats index, which is intended to reflect the performance of S&P Composite 1500 companies that have increased their dividends for at least 20 consecutive years. AT&T is a major holding for both funds mentioned here, but their portfolios look rather different otherwise.

Just to name a few, the top 10 holdings of the S&P Dividend ETF include some of my favorite REITs for income and long-term growth -- Realty Income Corporation, National Retail Properties, and HCP, Inc. All three of these have delivered market-beating total returns over the past 20 years in addition to their predictable dividend increases. Chevron and Caterpillar are also included in the top 10, and should benefit when commodity prices begin to rebound.

The fund pays a dividend yield of just over 3% as of this writing, but more important than the yield is that these are dividends you can count on. These are companies that have increased their dividends each and every year no matter what the economy was doing, and you can be pretty certain that they will continue to do so.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Brookfield Infrastructure Partners L.P. Stock Quote
Brookfield Infrastructure Partners L.P.
$38.00 (1.28%) $0.48
SPDR Series Trust - SPDR S&P Dividend ETF Stock Quote
SPDR Series Trust - SPDR S&P Dividend ETF
$120.08 (0.37%) $0.44
Invesco Exchange-Traded Fund Trust II - Invesco S&P 500 High Dividend Low Volatility ETF Stock Quote
Invesco Exchange-Traded Fund Trust II - Invesco S&P 500 High Dividend Low Volatility ETF
$44.12 (0.41%) $0.18
Chevron Corporation Stock Quote
Chevron Corporation
$143.71 (2.08%) $2.93
Kinder Morgan, Inc. Stock Quote
Kinder Morgan, Inc.
$16.64 (1.74%) $0.28
Caterpillar Inc. Stock Quote
Caterpillar Inc.
$176.80 (2.61%) $4.49
HCP, Inc. Stock Quote
HCP, Inc.
$26.39 (-0.49%) $0.13
Realty Income Corporation Stock Quote
Realty Income Corporation
$69.50 (0.00%) $0.00
National Retail Properties, Inc. Stock Quote
National Retail Properties, Inc.
$44.35 (0.41%) $0.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.