7 best retirement stocks to buy and hold

Sit back, relax and enjoy the dividend payments and growth of these stocks for the long haul.

  • By Barbara Friedberg,
  • U.S. News & World Report
  • – 07/03/2019
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Choosing stocks is a challenge. You're basing buy decisions on past data and future projections. While understanding a stock's past performance is easy, predicting the future, is not.

Who would have thought that General Electric Co. (GE) would struggle or that early cell phone giant Nokia would falter? Then there's IBM (IBM), founded in 1911 and still relevant today. Every company has its ups and downs as internal problems, economic conditions and consumer preferences wax and wane.

If you're heading into retirement and hungry for a stable of buy-and-hold stocks, here are seven to get you started. Each of these retirement stocks hail from a distinct industry, improving portfolio diversification.

Berkshire Hathaway Inc.

With Berkshire Hathaway you get the best of the best companies. "Warren Buffett and vice chairman Charlie Munger have assembled a terrific executive team and enduring culture that ensures Berkshire's success well beyond their lifetimes. Berkshire was once considered a vehicle to take advantage of Buffett's stock-picking prowess. But now it is a diversified portfolio of operating companies, largely concentrated in recession-proof, staid industries such as consumer products," says Robert Johnson, chairman and CEO of Economic Index Associates. Berkshire Hathaway enjoys owning many businesses that individually have wide moats, such as Geico and General Reinsurance Corp. BRK.B has a projected one-year price estimate of $241.67.

Anheuser-Busch InBev

With a five-star Morningstar rating, this universal brand is the largest brewer in the world as well as one of the top consumer products company. Another wide-moat stock, BUD is in a recession-proof industry and enjoys an efficient operation. The company's growth is fostered by smart acquisitions of other large moat, efficient companies such as Grupo Modelo, Oriental Brewery and SABMiller. Adding to BUD's appeal, the company boasts near-monopoly status in several Latin American and African countries. BUD stock has a one-year target price of $94.31. To cushion any downward blips, the company has a current dividend yield of 2.3%, better than most savings accounts.

Dominion Energy

Energy companies are revered for dependable, high-dividend payments. Dominion is developing conservation-related wide-moat initiatives designed to lower its carbon footprint. To that end, the company recently exited the exploration and production business and left no-moat merchant energy plants. The Virginia and North Carolina diversified energy company is well-run with an eye for the future. Morningstar analyst Charles Fishman says the wide-moat businesses will create about 50 percent of Dominion's operating earnings within four years. The balance will come from the gas and electric utilities. D stock has a projected one-year price of $78.93. Annual dividend increases averaged approximately 9% and the current 4.7% dividend yield affords retirees a comfortable income stream.

Microsoft Corp.

"Microsoft recently leapfrogged Apple (AAPL) as the most valuable U.S. company, after an impressive year in the market. The company is rapidly growing its cloud business, and it has its subscription-based Office 365, giving it an earnings stream that is recurring and consistent," says David Kass, a professor at the Robert H. Smith School of Business. Unlike its competitor Apple, MSFT isn't faced with the need to update product hardware. Its forward-looking growth prospects are good, with a decent dividend yield of 1.5%. MSFT stock has a one-year target estimate of $144.06. The share valuation is a bit high with a price-earnings ratio of 30.33, so investors might wait for a pullback before investing.

HCP

HCP is a real estate investment trust stock that invests in health care properties. HCP was launched in 1985 and the first health care REIT added to the S&P 500 (.SPX). The firm owns medical offices, senior housing and life science buildings across the U.S. With America's aging population, the health care industry is poised to grow. REITs are required to pay out 90% of their profits to investors, making REITs ideal for investors seeking retirement stocks plus cash flow. HCP offers a 4.7% yield. There's not great upside potential this year, with a one-year price target of $32.79, but both real estate and health care hold up well during recessions.

Imperial Brands

Founded in 1901, this U.K. tobacco products company offers a wide-competitive moat and a large global consumer market. U.S. consumers will recognize IMBBY's Winston and Kool cigarette brands. For those anti-smoking retirees, the company is also involved in non-tobacco products and services such as restaurants, pharmaceutical distribution, point-of-sale software and long-haul transportation. The current analysts project 16% growth, a turn around from prior difficult times. The stock offers a generous 6.8% dividend yield. The $66 one-year price estimate is more than double the current price. This Morningstar five-star stock is significantly undervalued, offering both capital appreciation and a healthy dividend payment.

Apple

The Apple brand is known across the globe for a streamlined interface and status products. Apple charges premium prices for its impenetrable iOS system. But the company is dependent upon frequent product updates and consumers willing to pay up for these product tweaks. "Apple is a well-run growth company that has extraordinary profit margins at a reasonable valuation. It is further de-risked when you consider management's continued preference for buying back shares over pursuing untested and lower margin alternatives," says Jason Escamilla, CEO at Impact Labs. Apple sports a moderate P/E ratio of 17.03. Consensus analysts predict a one-year target price estimate of $212.03.

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