Retirement Investing: 3 Holdings EVERYONE Should Have

Yogi Berra, the longtime catcher for the New York Yankees, might be a truly wise man … the American Confucius. Or he might just have a loose screw. We’ll never really know. But his witty yogisms have left their mark on the English language over the decades. Perhaps centuries from now we will find them in fortune cookies.

3 Core Holdings Every Retiree Should Have

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Well, I’m going to adapt a quote attributed to him — “The future ain’t what it used to be” — to retirement. The future of retirement ain’t what it used to be.

Retirees today generally do not have a pension to fall back on, and Social Security hardly pays the bills. This means that now, more than ever, Americans are responsible for funding their own retirements.

Today, we’re going to look at three stocks that I consider a solid foundation for a retirement portfolio. All pay respectable current dividends, and — importantly — all have a long history of raising their dividends. That’s critical to ensure your income stream keeps up with inflation over time.

Three stocks do not make a properly diversified portfolio, of course, but these three can be thought of as core holdings you can hold through thick and thin. Buy them, collect the dividends and put your mind at ease.

3 Core Retirement Holdings: McDonald’s (MCD)

mcdonald's-mcd-stock ko stock yum stockMCD Dividend Yield: 3.6%

At the top of the list is a stock that has become nearly as a big of a pariah as Big Tobacco: Global fast-food giant McDonald’s (MCD).

I know, I know. Americans are eating healthier these days, and that means fewer Big Macs and fries washed down with sugary Dr. Pepper. (Yes, Dr. Pepper. It’s a Texas thing. Deal with it.)

But keep in mind, McDonald’s has been around for a long time, and its menu has changed more times than I can count since the stock went public in 1965. As Americans’ tastes have changed, so have McDonald’s offerings.

I should also add that McDonald’s is not purely an American company. In fact, it gets less than a third of its sales in the U.S. A little more than 40% of sales come from Europe, with most of the rest coming from Asia and emerging markets.

Why do I like McDonald’s as a core retirement stock?

It’s all about the dividend. MCD stock has raised its dividend every year since 1977, and its dividend has been growing at a blistering pace over the past decade. Over the past 10 years, McDonald’s has grown its dividend at a 18% clip. Dividend growth has been a little more modest of late, growing at a 7% clip over the past three years.

That’s not half-bad. MCd is a champion among retirement stocks, and you can buy it today with a 3.5% dividend yield.

Core Retirement Holdings: Realty Income (O)

Core Retirement Holdings: Realty Income (O)O Dividend Yield: 5%

Next up is a stock that I own … and have pledged never to sell: the “Monthly Dividend Company,” Realty Income (O).

I’m serious when I say that I intend to pass my shares of Realty Income to my kids. And how can I be so confident that Realty Income will still be around decades from now?

To start, Realty Income doesn’t really have to worry about technological obsolescence. Realty Income is a landlord with a portfolio of more than 4,300 properties, most of which are high-quality, high-traffic retail sites. A Walgreens (WBA) or CVS (CVS) pharmacy is a “typical” property for Realty Income. Unless we start living in underground pods like the poor souls in The Matrix, there is really not much to worry about here.

Furthermore, Realty Income’s properties are leased on a triple-net basis, meaning that the tenants are responsible for paying all maintenance, taxes and insurance.

Realty Income has paid 538 consecutive monthly dividends, and has raised its dividend for 70 consecutive quarters.

Realty Income, like the rest of the REIT sector, has taken its knocks in 2015. The share price is down nearly 20% from its recent fears due to investor concerns about rising bond yields.

Bond yields, shmond yields. At today’s prices, Realty Income yields an attractive 5%. And unlike bond coupon payments, which are the same until maturity, Realty Income’s dividend rises every year.

Core Retirement Holdings: Unilever (UL)

Core Retirement Holdings: Unilever (UL)UL Dividend Yield: 3.3%

And for my final core retirement stock, I give you consumer goods and packaged foods company Unilever (UL).

Pending the actual End of Days, Unilever will still be around 30 years from now and still paying a solid dividend.

How can I be so sure?

If you’ve ever set foot in a supermarket anywhere in the world, then you are familiar with Unilever’s brands. Among many others, they include: Axe, Ben & Jerry’s, Bertolli, Dove, Lipton, St Ives, VO5 and Vaseline. If there was ever a set of products that was apocalypse-proof, it would be Unilever’s.

But while its products may be mundane consumer staples in the West, Unilever has excellent growth prospects abroad. Unilever gets nearly 60% of its revenues from emerging markets, meaning that we should see healthy growth for a long time to come.

UL has raised its annual payout every year for 42 consecutive years, and currently yields 3.3%.

While not exceptionally cheap at current prices, Unilever is a certainly a stock to buy on any pullbacks.

Charles Lewis Sizemore, CFA, is the chief investment officer of investment firm Sizemore Capital Management. As of this writing, Charles Sizemore was long MCD, O and UL. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays.

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