Picking the right stocks for a retirement portfolio is a balancing act. Investors need growth to outpace inflation’s bite, but they also want to shield their nest egg from market volatility. These dual objectives make blue-chip stock picks popular among retirement investors.
While no investment is full-proof, placing capital in blue-chip stocks is about as safe a move as any investor can make, other than perhaps buying U.S. Treasuries. That’s because blue chips are well-known companies that hold dominant positions in the sectors in which they compete, are profitable, produce consistently strong earnings and reward shareholders with dividend income.
Here are seven blue-chip stock picks that are perfect for retirement.
| KO | Coca-Cola | $59.53 |
| WMT | Walmart | $140.73 |
| BAC | Bank of America | $35.87 |
| BLK | BlackRock | $648.98 |
| MSFT | Microsoft | $226.75 |
| NFLX | Netflix | $296.94 |
| PG | Procter & Gamble | $131.88 |
Coca-Cola (KO)
Given that it’s been in business since 1892 and essentially sells the same soft drink today as it did more than a century ago, one might assume that Coca-Cola (NYSE:KO) would be a little stale as an investment at this point. But that’s not the case. The Atlanta-based company continually finds ways to reinvigorate its business and keep sales aloft regardless of the prevailing economic climate.
The company’s third-quarter results offer a great case study for investors. Despite inflationary pressures and a slowing economy, the company exceeded Wall Street’s forecasts and raised its full-year guidance. Management pulled off this feat by leveraging its pricing power, which is the ability to lift prices without losing customers. Specifically, the company said it raised prices to help offset its elevated input costs. In addition to its price hikes, Coca-Cola said it is appealing to price-sensitive consumers through product offerings such as smaller bottles and multi-packs that contain fewer cans.
As a result, the company managed to report year-over-year increases of 10% in net revenue, 16% in organic revenue and 14% in profits. For the full year, the company says it now expects adjusted earnings per share growth of 6% to 7%, up from a previous forecast of 5% to 6%.
Due to Coca-Cola’s loyal customer base and sound business management, shares are up 0.5% on the year, while the S&P 500 is down 20%, and yield 3%.
Walmart (WMT)
It’s not glamorous, exciting or cutting edge, but retailer Walmart (NYSE:WMT) is the kind of stock that investors can rely on. So far in 2022, WMT stock is down just 3%. Over the past five years, shares have gained 60%.
The company owes this strong performance to its huge retail presence in the U.S. and Canada, as well as its focus on low prices. Consumers are responding to Walmart’s discounts this year as inflation runs at a 40-year high, and food prices, in particular, have gone through the roof.
Strong sales and customer loyalty enable Walmart to post reliably strong earnings in any economy. In August, the company reported better-than-expected second-quarter earnings and maintained its guidance for the year. Earnings per share of $1.77 were much better than the $1.62 analysts had penciled in for Q2. Revenue was up 8% to $152.86 billion, also beating estimates, and U.S. same-store sales grew 6.5% from a year ago, excluding fuel.
WMT stock trades at 21 times forward earnings, which is not that exorbitant given the company’s size and its $380 billion market capitalization. The stock has a dividend yield of 1.6%.
Bank of America (BAC)
Bank of America (NYSE:BAC) remains a solid blue-chip stock that is perfect for retirement. The second-largest financial institution in the U.S., Bank of America can be counted on in good economic times and bad. This year, BAC stock is down 22%, mirroring the decline in the benchmark S&P 500 index.
The bank is starting to see real benefits from higher interest rates, recently reporting a better-than-expected third-quarter profit due in large part to gains achieved on its interest income. Earnings per share came in at 81 cents versus 77 cents that had been estimated on Wall Street. Revenue of $24.61 also exceeded estimates and was up 8% year over year. Management said higher interest rates charged on its loans are producing more revenue, allowing it to generate higher profits even as other areas of its business, such as investment banking, decline.
Bank of America’s stock has gained nearly 30% over the past five years, trades at less than 10 times forward earnings, and offers shareholders a quarterly dividend that yields 2.5%.
Microsoft (MSFT)
Technology giant Microsoft (NASDAQ:MSFT) is going through a bit of a rough patch, but it remains a great long-term investment. Investors should use the current downturn in MSFT stock as an opportunity to buy shares on the cheap. This is especially true after Microsoft’s post-earnings sell-off following the release of its fiscal first-quarter results.
Microsoft reported marginally better-than-expected revenue of $50.12 billion and earnings per share of $2.35. However, it caused a kerfuffle by lowering its guidance, saying it now expects $52.35 billion to $53.35 billion in revenue for the current quarter, or about 2% growth at the middle of the range.
During an earnings call with analysts and media, management said that its business is being impacted by “cyclical trends” and announced plans to slow hiring. Microsoft also introduced “Viva Engage,” a new feature in the Teams communication app that enables people to share videos.
Despite the current headwinds, MSFT stock remains a solid blue-chip choice for any portfolio. While shares are down 33% year to date, the stock is up more than 260% over the past five years. Since going public back in 1986 at $21 a share, the stock has gained 980%. Plus, the company has paid (and raised) a dividend for 20 years with shares currently throwing off a yield of 1.1%.
BlackRock (BLK)
BlackRock (NYSE:BLK) is the world’s largest asset manager with $8.5 trillion in assets under management. The potential for a global recession doesn’t seem to have hurt BlackRock any. The New York-based financial firm, led by Wall Street legend Larry Fink, posted better-than-expected third-quarter results.
BlackRock reported a 12.8% drop in its Q3 profit to $9.55 per share. But even with the decline, the company’s profit was much better than the $7.06 a share that Wall Street analysts had forecast. Fixed income inflows of $90.6 billion during the quarter were a bright spot for the company. And it saw $2.6 trillion in net inflows into its exchange-traded funds.
While BlackRock’s stock is down 29% this year, it has gained 37% over the past five years and is up 242% over the past decade. The stock also yields 3.1%.
Netflix (NFLX)
What a difference a quarter can make. Shares of streaming giant Netflix (NASDAQ:NFLX) vaulted 13% higher immediately after the company posted better-than-expected third-quarter results, adding 2.4 million net new subscribers between July and September. While NFLX stock is down more than 50% year to date, shares are up 33% over the past month.
The turnaround comes after investors abandoned NFLX stock in the spring after the company reported weak financial results and declining subscriptions. However, the recent upswing provides a good indication that Netflix has staying power and a bright future.
The company’s prospects will depend largely on its ability to continue attracting subscribers with hit TV shows and movies such as “Stranger Things” and “The Gray Man.” The company also has to demonstrate to analysts and shareholders that it can adapt its business in the face of growing competition. To that end, Netflix is launching a new lower-priced ad-supported streaming tier in November. The company also said it is cracking down on password sharing to help boost revenue.
NFLX stock is up nearly 50% over the past five years and has gained nearly 1,880% since its 2002 IPO at $15 a share.
Procter & Gamble (PG)
Procter & Gamble (NYSE:PG) is another relatively boring but steady stock that is perfect for a retirement portfolio. A going concern since 1837, Procter & Gamble sells the household items people need in their daily lives even if they rarely give them much thought. Its products include Tide laundry detergent, Gillette razor blades and Crest toothpaste.
Procter & Gamble’s household essentials make the company and its stock largely immune to economic downturns and recessions like the one economists expect us to enter in 2023. When push comes to shove, consumers are likely to continue buying deodorant even as they cut back on discretionary items such as potato chips.
The necessity of its products and pricing power have enabled Procter & Gamble to continue churning out strong earnings despite numerous challenges. The company just reported a better-than-expected third-quarter print of $1.57 in earnings per share on $20.61 billion in revenue.
PG stock is down 19% on the year. Shares trade at 23 times forward earnings and offer a quarterly dividend that yields 2.8%.
On the date of publication, Joel Baglole held long positions in BAC and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
