I have a completely different philosophy for retirement stocks than virtually anybody else in the financial markets.
The prevailing wisdom is to overweight in bonds in order to generate income and to allegedly reduce volatility in the overall portfolio. That’s horrible advice, mostly because bonds and bond funds are actually more volatile than stocks are.
The other terrible advice that is given to current and pending retirees is that retirement investors should plow money into blue-chip stocks that pay dividends of 2% to 3%.
That is also terrible advice because ever since the Federal Reserve reduced yields, a lot of retirement investors have moved further out on the risk curve into exactly these stocks, bidding them up to levels that are unsustainable.
The stocks are more likely to fall in the next few years by substantial amounts, more than enough to wipe out whatever dividends are being paid. That’s why I chose a particular set of stocks, ones that go against the standard retirement grain, but that should be in your portfolio.
Editor’s Note: This story was originally published on March 12, 2018. It has since been updated with current figures.
Must-Own Retirement Stocks: United Parcel Service (UPS)
United Parcel Service (NYSE:UPS) is about as close to a no-brainer in the category of retirement stocks as you can get. It’s always great to have stocks that are part of an oligopoly in your portfolio, especially if they been around a very long time, and have a very good track record.
UPS represents a core business of the human experience. People will always need to send things around the globe, and are only so many companies with a broad enough reach to do that. It pays a very respectable 3 BA stock should continue to do well for quite some time .44% yield.
Must-Own Retirement Stocks: Boeing (BA)
Source: Phillip Capper via Flickr
The Boeing Company (NYSE:BA) is another company that falls into the oligopoly category for retirement stocks. There are a limited number of companies that actually manufacture airplanes to begin with, and very few companies that have the breadth of experience in defense contracting.
BA has been in business for 100 years and its expertise in defense, space, security, and airlines is unparalleled.
With an administration that places a high value on defense, Boeing will do well for quite some time, and the $5.68 in dividend payments every year as an added bonus.
Must-Own Retirement Stocks: Visa (V)
Source: Kārlis Dambrāns via Flickr
Visa, Inc. (NYSE:V) is yet another company in the same theme of oligopolies for retirement stocks. There are very few credit card processing companies in the world, and Visa has the largest market share out of any of them.
With financial services becoming more and more impactful in the global economy, and consumers needing an increasing number of payment solutions, Visa will be at the top of the class for a very long time.
It generates a tremendous amount of free cash flow and, in fact, has so much that he could afford to raise its dividend significantly.
Must-Own Retirement Stocks: Exxon (XOM)
Exxon Mobil Corporation (NYSE:XOM) belongs to a category of retirement stocks that I also considered to be core holdings for just about any portfolio. You must have fossil fuel energy companies represented in some way in your portfolio.
Energy is a central component of the human experience. Look around you every single thing has been brought to your location by a vehicle that required fossil fuels to transport them.
Not to mention whatever was needed to create the products in the first place, such as plastics. Beyond that, of course, energy is what makes the world move.
Exxon Mobil happens to be substantially undervalued at this time.
Must-Own Retirement Stocks: AT&T (T)
Source: Mike Mozart via Flickr
AT&T Inc. (NYSE:T) might not have made my list several years ago, despite the fact that it is a dividend aristocrat that has been increasing dividends every year for more than 25 years.
That’s mostly because organic growth is a telecom company had been slowing. But then it purchased DirecTV, and is now becoming a content play with its proposed Time Warner Inc. (NYSE:TWX) merger.
I do believe the merger will go through is I don’t believe the Department of Justice has a viable case.
Must-Own Retirement Stocks: Disney (DIS)
The Walt Disney Company (NYSE:DIS) is the premier media and entertainment company in the world. As it is, it owns three extraordinary properties in Marvel Studios, Lucasfilm and Pixar films.
That says nothing about its own incredibly successful studio. Put all this together with the assets it hopes to acquire in the buyout of Twenty-First Century Fox Inc. (NASDAQ:FOXA), and Disney will have enough content that will literally last a generation and probably longer.
The theme parks and resorts have become a staple of tourism, and one that is constantly innovating and redefining itself.
Must-Own Retirement Stocks: Duke (DUK)
Duke Energy (NYSE:DUK) is a massive utility that stretches through the Southeast and Midwest. The wonderful thing about utility stocks is that they are regulated.
That means that the utility has a very clear idea of how much revenue it will generate every year, and therefore what kind of costs it can generate in order to not only remain profitable but pay a regular dividend.
Speaking of that dividend, Duke has been paying it every quarter for 91 years.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities.