- Buying quality retirement stocks can provide both safety and growth to keep savings goals on track
- AbbVie (ABBV): With revenue concerns abating, it’s time to take a fresh look at this dividend king.
- Amgen (AMGN): This biotech giant has an ideal combination of in-market products and products in its pipeline.
- Apple (AAPL): Make this tech giant prove that the bears are right before abandoning its stock.
- Dollar General (DG): Inflation and a weakening economy will help keep the revenue coming.
- Western Union (WU): In tough times, the company’s reliability helps keep investors afloat.
- Schwab U.S. Dividend Equity ETF (SCHD): An ETF that tracks the Dow Jones U.S. Dividend 100 index.
- ProShares S&P 500 Dividend Aristocrats ETF (NOBL): This ETF invests exclusively in the elite group of companies known as dividend aristocrats.
For many years, the model for finding retirement stocks to buy got clouded with some FOMO (fear of missing out) and YOLO (you only live once). Investors got conditioned to years where a 20% or higher return was the normal.
However, to borrow an axiom from golf, 2022 is turning out to be a stark reminder to investors that “sometimes par is a really good score.” Whatever happens over the next few years (and I’ll always remain a cautious optimist), the new reality is that investors who get high single-digit growth will be doing well.
One way to boost the total return of your portfolio is with quality dividend stocks. Reinvesting these regular dividends is a simple way to boost the total return of your portfolio. That makes them the ideal choice for long-term retirement portfolios where safety and security should be the top priority.
So let’s get right to it. Here are seven retirement stocks to buy that combine modest growth with safe dividends.
The first of the retirement stocks to buy is AbbVie. Concerns about expiring patents for its flagship drug, Humira, gave analysts reasonable concerns about the company’s revenue outlook. However, the company’s most recent earnings report should quell those concerns.
First the company is showing that sales of Humira in Europe (where Humira has lost its patent protection) are not declining as rapidly as expected. Second, AbbVie has in-market replacements for Humira that are delivering strong year-over-year revenue growth.
My InvestorPlace colleague Josh Enomoto also reminded investors that AbbVie is likely to benefit from its acquisition of Allergan, which put Botox into the company’s product portfolio.
Investors also get a stock that remains up 11% for the year and recently joined the ranks of dividend kings. This means it has increased its dividend each year for 50 consecutive years. And ABBV stock has a dividend yield that currently is 3.73%.
Sticking in the biotech space, Amgen is another company that is up 10% for the year. One reason for this is that investors are no longer chasing after speculative biotechs that were competing in the Covid-19 vaccine race.
That is putting attention back on companies that are delivering revenue and earnings today and will continue to do so tomorrow. That’s Amgen. The company’s portfolio focuses heavily on treatments for heart disease and cancer which means demand will stay high.
And, as Tezcan Gecgil points out, the company is building a new manufacturing plant in North Carolina. With supply chains likely to become shorter in future years, this should aid the company’s efficiency as well as lower costs.
Amgen has increased its dividend in each of the last 11 years and currently has a dividend yield of 3.14%.
When considering retirement stocks to buy, you may challenge my decision to put Apple on this list. There are bearish views of the “FAANG” stock. And AAPL stock is down 22% so far in 2022.
However, much of the concern about Apple’s growth is based on its iPhone. But the company has shown over the last few years that its Services division is responsible for a good bit of the company’s growth in recent years.
And while Apple doesn’t offer a particularly impressive dividend yield, it has been increasing its dividend in each of the last 11 years. Plus, the company has a history of share buybacks.
That’s why you should make Apple prove that it’s not a great long-term growth stock before you abandon it.
Inflation is taking a bite out of consumer’s take-home pay and that is showing up in the results of many retailers. And that includes discount stores such as Dollar General. I’m writing this a few days before the company reports earnings. If the trend continues, Dollar General is likely to deliver guidance that reflects the effect that inflation is having, and will continue to have on its business.
However, the company has a business model that puts its store locations in areas that are not easily serviced by the larger chains. This is likely to give the company a distinct advantage as consumers will be looking to find ways to save money on gas as well as on their groceries. And Dollar General is putting more emphasis on allowing customers to use their stores as a one-stop location, which should be an additional catalyst.
Many economists are predicting a recession in the United States if not in 2022, then sometime in 2023. If you share that view, then Western Union may be worth a look. The company remains a reliable option for the underbanked or unbanked. This group may rely on the company’s ability to facilitate peer-to-peer money transfers as well as providing bill payment services. The company is also embarking on an internal strategic review, which may lead to greater efficiency in the company’s operations.
WU stock is down 6% this year and currently has a consensus Hold rating. However, the stock is still a favorite among institutional investors. And it currently has a dividend yield of over 5% with a seven year streak of raising its dividend.
Schwab U.S. Dividend Equity ETF
An alternative approach to finding retirement stocks to buy is to look at dividend-focused exchange-traded funds (ETFs). I have two on this list. The first is the Schwab U.S. Dividend Equity ETF.
This ETF tracks the performance of the Dow Jones U.S. Dividend 100 index. This means the fund invests in high-yielding U.S. stocks that are financially sound and have a history of paying consistent dividends. In fact, one of the fund’s largest holdings is Amgen which is also on this list of retirement stocks.
This is reflected in the fund’s dividend yield which is over 3% (3.04%) at the time of this writing. The fund also has what an amazingly low expense ratio of just 0.06%. That means that for a $10,000 investment investors pay just $6.
The fund is down about 7.5% for the year. However, much of that loss has occurred with the broad selloff in mid-May.
ProShares S&P 500 Dividend Aristocrats ETF
The last security on this list of retirement stocks to buy is the ProShares S&P 500 Dividend Aristocrats ETF. As its name implies, the benefit of this fund is that it invests exclusively in companies that are part of the dividend aristocrats club. This means that the companies have increased their dividends for at least 25 consecutive years. Companies that prioritize a dividend in this fashion are much more likely to prioritize the dividend.
Another feature of the fund is that it does not allow any sector carry more than 30% of the weighting in the fund. The top three weighted sectors in the fund are consumer staples, industrials and materials.
The fund has an expense ratio of 0.35%, which is considered a bit expensive. And it has not been spared from the market selloff. The fund is down 10% in 2022.
On the date of publication, Chris Markoch had a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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