No matter where you are in your investment journey, saving for retirement is probably one of your top goals. That’s why there’s never a bad time to look for undervalued retirement stocks.
The good news is that advancements in medicine mean you have a longer life expectancy. The bad news is that the amount you’ll need to save for a comfortable retirement (however you define that) is higher than in earlier generations.
Therefore, the stocks that you choose when investing for your retirement need to deliver growth and value. You want to buy companies that are still growing earnings so you can get some stock price appreciation.
You’ll also want to consider companies that offer reliable dividends that you can reinvest now and use as a source of income later.
To choose the stocks in this article, I looked at large-cap companies with a beta of 1 or lower. In addition, I looked for companies with a price-to-earnings ratio of 27 or less and a history of delivering both share price growth and dividend growth.
Deere & Company (DE)
With a stock price of over $400, some investors may feel that there’s not much growth left in Deere & Company (NYSE:DE). But this wouldn’t be the first time that the company has proven naysayers wrong.
The company is taking the lead in bringing technology, including artificial intelligence (AI) to its customer base. It’s an example of an iconic company still making the investments to make it relevant for years to come. That’s a good recipe for a retirement stock.
And it also appears to be undervalued. DE stock is down 4.2% in 2023 and 6.2% in the last month alone. This may be a case of investors taking some profits after a strong run-up for the stock in late 2022.
However, the company’s year-over-year revenue and earnings continue to grow, a fact that may not be fully priced into DE stock.
The dividend has a yield of just 1.3%. But with a 15% payout ratio, that dividend looks very safe and has room to grow with earnings. Plus, Deere has increased its dividend for the last three years and it currently pays $5.40 per share annually.
Lockheed Martin (LMT)
The company is the leading United States defense contractor, both in revenue and in market cap.
To put that into perspective, the company receives three times more revenue in contracts from the Pentagon than the second-place company. There are few line items in the U.S. budget more secure than defense spending.
As of this writing, LMT stock trades hands at around $438 per share. That’s down 12.8% for the year and 5.7% in the last month alone. Viewed through the wider lens, the stock has grown 25% in the last five years.
Lockheed Martin is well on its way to becoming a Dividend Aristocrat. The company has increased its dividend for 20 consecutive years and is maintaining a 43.8% payout ratio. The dividend also richly rewards shareholders with an annual payout per share of $12.
Hershey’s (NYSE:HSY) stock has sold off since hitting an all-time high in May 2023. In fact, HSY stock is down 19.5% in the last three months. A short-term sell-off was something that concerned me when I listed Hershey among my stocks to sell in July.
However, investing for retirement means taking a long-term view. The company’s earnings report showed YOY revenue and earnings growth.
The company has products that consumers will continue to pay for even when confronted with sticky inflation. That will be important as Hershey’s will probably face higher producer costs.
Even after the sell-off, HSY stock is up over 105% in the last five years. Earnings are expected to grow by 7% in the next year.
The stock is sitting near its 52-week low with analysts giving the stock a 25% upside. Investors also get a sweet dividend that has been growing for 14 consecutive years and has a yield around 2.25%.
Like the previously mentioned Deere & Company, Caterpillar (NYSE:CAT) is another iconic blue-chip company that is making itself relevant in an AI world. The company is on the leading edge of AI as it relates to the
In the last five years, CAT stock is up more than 80%. Unlike some stocks on this list, it’s trading near 52-week highs, not lows.
It makes this list of undervalued retirement stocks because there’s still value to be unearthed. For starters, the company should post 7% earnings growth in the next 12 months.
The company has also been one of the leading beneficiaries of the Inflation Reduction Act. The looming budget shutdown may threaten some government spending. But politicians will be careful not to cut out too many infrastructure projects as we get ready to enter an election year.
Long-term investors get a Dividend Aristocrat that has raised its dividend for 31 consecutive years, sports a safe payout ratio of around 31% and pays out $5.20 per share annually.
General Mills (GIS)
In a familiar theme, GIS stock is down 22% for the year, because of a sharp sell-off since the stock reached an all-time high in May.
The concern is that consumers will continue to trade down to private label brands and away from the name brands in the General Mills portfolio.
So far, that hasn’t been the case. In its last quarter, the company posted a small YOY revenue gain, but earnings were flat over the same period.
This is about finding undervalued retirement stocks, and General Mills fits that description. The stock is up 49% in the last five years and also pays a dividend with a yield of 3.55%.
That’s well above the sector average of 1.9%. This isn’t a stock for investors looking to get rich quickly. This is an ideal choice to build wealth slowly for your retirement.
Crown Castle (CCI)
Crown Castle (NYSE:CCI) specializes in providing a network of cell towers and fiber-optic cable. This is critical to the continuing build-out of 5G infrastructure. The company has been disappointing on earnings in the last 12 months as higher interest rates put pressure on its capital-intensive business.
But back to the dividend. Crown Castle issues its dividend quarterly and that dividend has a yield of 6.36%. There’s some concern about the sustainability of that dividend. However, other voices suggest the dividend is in-line with other REITs.
That’s for you to decide. However, consider that CCI stock is down more than 50% from its December 2021 all-time highs. And analysts project a 45% upside in the next 12 to 18 months.
Extra Space Storage (EXR)
When you think of a REIT, Extra Space Storage (NYSE:EXR) is the type of business that comes to mind. The company focuses on a specific niche, public self-storage units.
EXR continues to report a 95% occupancy level. That’s significant because what REITs may lack in growth, they make up for in consistency.
With Extra Space Storage, that consistency shows up in its revenue and earnings. So why is the stock down so sharply from 2021?
It’s likely that investors cycled out of value stocks in search for some growth, and REITs got left behind.
However, that makes the case for Extra Space Storage as one of the most undervalued retirement stocks very well. It’s also good news for income-oriented investors who can buy EXR stock while it’s down 34% in the last 12 months and 15% in 2023 alone.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.