With all the talk about high-growth stocks, high-yield stocks and stocks you can get high on, whatever happened to the proverbial “widows and orphans” retirement stocks?
These are the stocks I’d classify as the Peter Lynch stalwarts — legendary names that have been around a long time, continue to grow in the 5%-10% range, pay a dividend, and aren’t going to leave you penniless in a crash.
There are many companies to choose from, but here are a few particular retirement stocks to buy.
Stocks to Buy for Retirement: Lockheed Martin (LMT)
The first retirement stock I’d select is that old standby, Lockheed Martin (LMT).
I think when people consider the company, they have images of airplanes and missiles. They wonder how this can still generate enough business to keep going since 1909. (At least, that’s how I think of it.)
But the truth is that Lockheed is so much more. It’s aeronautics, information systems, mission systems, space systems … and yes, missiles. It’s military aircrafts, air and missile defense systems, logistics, ship and submarine mission and combat systems, radar systems — it’s modern warfare technology, and the complexity of it is what makes LMT so valuable.
Lockheed will remain in fine shape for a long time because the world — whether you want to believe it or not — will always need weaponry.
LMT currently has $2.6 billion in cash and $6.1 billion in cheap debt. The company generates reliable cash flow and frequently raises its dividend, now at 3.2%. Analysts predict stalwart long-term growth of 8.5%.
Stocks to Buy for Retirement: Genuine Parts Company (GPC)
Another retirement stock that fits right into this category is one of the most boring stocks I can think of: Genuine Parts Company (GPC).
Come to think of it, though, Peter Lynch always said boring stocks were good choices.
GPC plays in two areas I love as businesses: automotive parts, and distribution. Specifically, it distributes parts for cars, trucks and SUV’s, but also for buses, motorcycles, farm vehicles, and heavy-duty equipment. It also sells accessory items.
You know GPC’s distribution network by another name: NAPA Auto Parts.
I love auto part businesses because the world will always need cars. Cars will always break. Cars will always need parts. Most of all, GPC doesn’t even make the parts — it just distributes them. Everyone knows the real money in any business is in distribution. As long as you have the network — and GPC has 1,100 Napa Auto Part Stores — you have a good shot.
GPC expels free cash flow in increasing amounts, along with an ever-increasing dividend, now at 2.6%. In fact, GPC’s long history of consistent dividend increases puts the company among our Dependable Dividend Stocks. Meanwhile, its long-term growth rate is at 9.5%.
Stocks to Buy for Retirement: AT&T (T)
Last but not least, I have to admit that AT&T (T) remains the ultimate retirement stock.
For all the crazy-fast developments in telecom, and the fact that AT&T seems to get nothing but bad press and is pressed by competition, it continues to chug along. The company just announced it’s hiring 3,000 retail employees. Long-term growth is pegged at 6%. What’s amazing about AT&T is the free cash flow — about $14 billion last year, $20 billion the year before that, and $14 billion the year before that.
That’s just heaps and heaps of money, of which T stock pays out about 70% in dividends, resulting in a yield of 5.2%.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at email@example.com and follow his tweets @ichabodscranium.