Last week, I wrote about redefining the term “conservative investor” when it came to asset allocation in your long-term diversified portfolio. The reason is that I believe it results in fixed income and retirement investors holding too many bonds and low-dividend paying stocks, which does not allow to keep those investors at pace with the real rate of inflation, which is closer to 10% and not 3%.
Building on that idea, I am going to suggest three stocks for retirement investors today that are not what most might consider retirement recommendations.
Don’t worry, I’m not suggesting retirement investors buy into Tesla Motors Inc (NASDAQ:TSLA). However, if you want to keep pace with the real rate of inflation, you are going to have to re-allocate.
This involves moving from dividend stocks that are paying less than 3%, and trying to find stocks that can squeeze out a bit more yield while also giving you a greater chance of capital appreciation while not exposing you to significantly more downside risk.
3 Stocks to Buy for Retirement Investors: Royal Bank of Canada (RY)
I’m going to first steer you north of the border to the Royal Bank of Canada (NYSE:RY). Canadian financial service operators tend to offer better dividends than their U.S. counterparts, so first of all, take the bank’s 4% dividend and be happy with that alone.
Also know, however, that the Royal Bank is in solid shape and not subject to solvency concerns. It’s a great operation and I have had some personal experience with one of their divisions in years past in the specialty lending arena.
But I’ve had even more experience with City National Corp (NYSE:CYN) where I’ve had a corporate account for almost 20 years. It’s a first-class operation that was just purchased by the Royal Bank, giving it a U.S. presence.
3 Stocks to Buy for Retirement Investors: Lockheed Martin Corporation (LMT)
We won’t ever be at war with Canada, but that’s hardly a reason to ignore Lockheed Martin Corporation (NYSE:LMT). It is telling that ever since our dovish president came into office, and despite the sequester (remember that?), this defense stock has more than tripled.
Of course, LMT stock gets contracts from others besides the government. It is also very well diversified across multiple segments, and executes extremely well in a sector that has pretty tough competition.
While it’s yield is only 3%, it raises it on a regular basis and I would expect that to continue. Meanwhile, LMT stock is a free cash flow machine, generating more than $3 billion annually and only paying out about 65% of it as dividends, so there is room for an increase.
In this case, though, you’ve got a bulletproof stock with room to run — and that’s something I would be happy to suggest to retirement investors.
3 Stocks to Buy for Retirement Investors: Duke Energy Corp (DUK)
Duke Energy Corp (NYSE:DUK) should suit retirement investors well. Unlike its energy compatriots that are suffering through the oil shock, DUK stock is diversified as a regulated utility provider, a provider of commercial power and a provider of energy for Latin America.
It’s also smart enough to move into solar power, just so as not to get left behind. Solar isn’t the greatest choice for power, but if it is set up in the right geography, then it can make sense for the electricity provider. Specifically, Duke is building two solar farms that can generate 52 megawatts for the one customer that can afford it — the U.S. government.
Duke has underperformed the S&P 500 over the last five years (83% versus 55%), but it pays a higher yield (4.2%) and enjoys a bit less volatility. It’s as safe a bet as you can find for retirement investors.
Retirement investors who are interested in learning more about re-defining “conservative investing” definitions can contact me at thelibertyportfolio@gmail.com, as this is a cornerstone of my forthcoming low-cost subscription newsletter.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance. He is the manager of the forthcoming Liberty Portfolio, has 20 years’ worth of experience in the stock market and has written more than 1,200 articles on investing. As of this writing, he did not hold a position in any of the aforementioned securities. He can be reached at TheLibertyPortfolio@gmail.com.
