During a week in which many high-flying growth stocks are reporting earnings, it’s a good idea not to get swept up in the frenzy and remember that slow and steady retirement stocks win races, too.
With long-term diversified portfolios, you must have what Peter Lynch called “stalwarts.” These are companies who big growth days are behind it, but still have decades more growth ahead, just at slower rates.
And they make for good retirement stocks.
These are retirement stocks that are organically growing net income in the high single digits, as opposed to those that make it seem like they are, but are goosing EPS growth via buybacks. They also tend to pay solid, respectable dividends.
And sometimes these retirement stocks re-invent themselves and find new growth engines that send them into quasi-growth stock multiples.
But the key is that these retirement stocks are reliable and you can sleep well at night with some of these in your portfolio.
Boring, Beautiful Retirement Stocks: Piedmont Natural Gas (PNY)
If you want to see a shocking chart, look at the one for Piedmont Natural Gas (PNY). It’s truly amazing, but the stock has returned 662% over the past 27 years vs. 722% for the S&P 500. When you factor in dividends, they have performed about the same.
Never heard of Piedmont? Besides yielding 3.6%, it also is one of the retirement stocks with a 4% to 8% five-year annualized dividend growth rate.
I like PNY stock because it not only distributes natural gas, but it also operates across both the regulated and non-regulated utility spectrum across North/South Carolina and Tennessee. Natural gas stocks have not been hammered the way oil stocks have because of the crash in oil prices. And as readers know, I love all kinds of fossil fuel energy stocks because there will be perpetual demand for them.
Boring, Beautiful Retirement Stocks: Sysco (SYY)
On a similar note, here’s an interesting chart for Sysco (SYY). We get the same long-term story, one that’s even better. Sysco has outperformed the broad market significantly, while paying dividends for many years. The dividend is presently at 3.3% and also has a 4-8% five year annualized dividend growth rate.
SYY stock conquered a major sector having to do with food. It distributes both food and related products (like utensils and napkins and so on) to the “food-away-from-home” industry. For example, I had some delicious granola at a café the other day, delivered there by Sysco. It distributes frozen meats, seafood, entrees, fruits, vegetables, and desserts, and also carried canned and dry food, dairy, beverfages…you name it.
When the zombie apocalypse hits, I’m headed for the nearest of its194 distribution facilities in the United States, Bahamas, Canada, and Ireland.
Boring, Beautiful Retirement Stocks: Leggett & Platt (LEG)
Leggett & Platt (LEG) is as boring as they come, but not when it involves returns blowing away the broad market as indicated in this chart.
This is an amazing business that’s been around for over a century, that handles things Peter Lynch would love because they are so boring: engineered components.
What are those? Essentially, they are things with springs, like bed innersprings, seat suspensions, furniture components and commercial fixtures. Useful, everywhere and utterly boring.
LEG stock also has had impressive dividend increases — even better than those above.
Leggett and Platt’s dividend has risen from 15 cents to 28 cents in a decade, which is an 86% increase. Although it has only risen 8% over the past two years, there’s no denying that LEG stock has solid free cash flow to pay shareholders. It routinely generates between $270 million and $380 million annually. The present dividend is 2.5%.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance. As of this writing, he did not hold a position in any of the aforementioned securities. He has 20 years’ experience in the stock market, and has written more than 1,200 articles on investing. He also is the Manager of the forthcoming Liberty Portfolio. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.
