The 7 Best Retirement Stocks to Own Right Now

James Brumley's picture

Wednesday, September 26, 2012 - 8:30am

by James Brumley

While it's fun to be aggressive with your investments in your working years, when you have time to ride out the rough patches, that same kind of investment flexibility may not be an option once you're retired. Older investors simply have to dial down their risk tolerance to ensure that their retirement fund lasts as long as it needs to.

That's why we talk about "Forever Stocks" so much at StreetAuthority. Simply put, you buy them, hold them "forever," and sleep well at night -- regardless of market conditions or what stage of life you're in. These types of stocks are ideal for any investor -- but especially for those at or near retirement age. Here are seven such stocks to consider.

1. Accenture Plc (NYSE: ACN)

A technology consulting business like Accenture may not feel like the most intuitive stock to own in a retirement account. But the company's income growth is surprisingly consistent.

Even when the global economy was struggling in 2009, Accenture's top line only slumped 3.6% and income only fell 5.9% in comparison with the previous year. Both were growing again by the following year.

 

2. W.W. Grainger Inc. (NYSE: GWW)

Executive Cleaning and maintenance supplies may be a boring line of business, but "boring" is precisely what retirees need from their investments. In investing, boring means reliable. And that's W.W. Grainger Inc., for sure.

The company has a long history of revenue and income growth -- even during tough times -- selling rolls of paper towels and light bulbs. That being said, there's nothing boring about Grainger's recent revenue growth. Sales were up 10% in August and up 11% in July.

 

3. Emerson Electric (NYSE: EMR)

Industrial equipment would seem like a cyclical industry, but when you're talking about Emerson Electric Co., its product line isn't as economically-sensitive as you might think.

The company caters to manufacturers as well as consumers, selling everything from power-grid management technologies to refrigerator parts. The stock's 3% yield is a nice income stream, but there's plenty of income growth opportunities here, too. The bottom line has increased at an average rate of 11% for the past several years, and that includes a dip in 2009.

 

4. International Business Machines Corp. (NYSE: IBM)

In much the same way Accenture is highly recession-resistant, the software and service division of IBM is also very resilient. Think of it as a nickel machine that collects recurring revenue each and every quarter -- once IBM becomes part of a company's technology framework, it's tough for that company to unwind that relationship.

While the current yield of almost 2% may not be all that compelling, what Big Blue lacks in current yield, it more than makes up for in growth and rising dividend payouts.

 

5. The Clorox Co. (NYSE: CLX)

It's not just a bleach company, though Clorox-brand bleach is its flagship product. The Clorox Co. also makes products under brand names Formula 409, Liquid-Plumr and Pine-Sol. As is the case with W.W. Grainger, the product lines Clorox owns are about as boring as any product line can be.

But, the business works. Revenue growth didn't even flinch in 2008 and 2009 when the rest of the world was in dire straits. Nearly three straight decades of dividend growth -- and never failing to pay one -- further sweeten the pot here.

 

6. General Mills (NYSE: GIS)

If there's one thing this summer's soaring corn prices confirmed, then it's that some food producers are highly vulnerable to volatile commodity prices. General Mills Inc. wasn't one of them.

That's not to say it didn't see a small disruption in its bottom line, but it was pretty well shielded from a disruption that made other food producers miserable.

More important, the yield of about 3.5% is a good payout, and this per-share dividend has grown religiously, from 3 cents per quarter in 1983 to 33 cents currently.

 

7. Waste Management (NYSE: WM)

The 4% dividend yield that Waste Management Inc. is paying out is the strongest distribution rate of the seven stocks comprising this list. Better still, with nine consecutive years of increased dividends, there's no reason to think the dividend won't continue to grow in the future.

Indeed, trash hauling may well be the one truly recession-proof business on the planet.

Waste Management adds value for shareholders by converting a tremendous amount of the trash it collects into a (free) renewable energy source. Its 110 gas-to-energy landfills create enough methane gas to power 400,000 homes every day.

 

Risks to Consider: While these picks may be safer than the average stock, no investment is bulletproof. Don't get complacent and miss the subtle warning signs these companies may give down the road.

Action to Take --> While these are all great stocks to own in retirement, it doesn't mean they aren't worth owning before retirement. They each offer a good mix of long-term growth and income potential, and could be great ways to fill holes in your portfolio right now, too.  
 

James Brumley does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.