Mention retirement stocks and your mind probably goes to more conservative, relatively defensive equities. The tried and true method of seeking investments that withstand market cyclicality while steadily growing is a wise one. In other words, it isn’t one from which to deviate.
And given the bear market we’re currently in, there are opportunities to be had. That means there’s a reasonable chance to benefit from the overall market slump, buy cheap, reliable retirement stocks and watch their value increase over the long term. Not particularly exciting, but that’s exactly why investors should do it. The patience required pays dividends literally and figuratively.
|JNJ||Johnson & Johnson||$171.66|
|LEG||Leggett & Platt||$39.26|
|GLP||Global Partners LP||$25.38|
Johnson & Johnson (JNJ)
Based on its current price and target price, Johnson & Johnson (NYSE:JNJ) stock is only underpriced by roughly 5%. Factor in its dividend, which will likely amount to $4.45 in 2022, and it’s then underpriced by about 7.5%. That still isn’t massively underpriced by most investors’ subjective standards I’d guess.
But the compounding power of time is what really matters when we’re talking about retirement stocks. Most signs point to Johnson & Johnson having staying power. One, the company has existed since 1886. Two, it has provided annual returns of 13.04% over the last decade. It should be noted that those returns do not include the dividends that JNJ stock has paid, without fail and without reduction, dating back to 1982.
Factor those in and the returns become even greater. Or use them as an income source in retirement. Either way, JNJ stock makes sense.
Prudential Financial (PRU)
Prudential Financial (NYSE:PRU) stock almost has to be a sure-fire pick-up. The Newark, New Jersey firm is best known for life insurance, so it’s bound to at least cross the minds of retirees and retirement investors.
That’s good because it remains relatively underappreciated. The same argument that applies to JNJ stock applies here. PRU stock has roughly 12% upside baked into prices based on analyst expectations. Add in its relatively strong dividend yielding 4.98% and that potential upside reaches 16.9%. In my book that’s an objectively strong return.
The reason to assume Prudential Financial is undervalued right now is that the company has significantly outstripped earnings expectations in each of the last four quarters. PRU stock has spent lots of time in the $120 range in 2022 suggesting that it could quickly bounce upward.
Caterpillar (NYSE:CAT) stock has been nothing if not a steady outperformer. That is evidenced by the fact that it too has exceeded earnings expectations in each of the last 4 quarters.
Perhaps then, it should be surprising that it is nowhere near overbought currently. But it isn’t and has 30% upside based on its average target price. That’s without factoring in the $1.20 dividend it pays on a quarterly basis.
Add to that secular trends, and a clearer picture emerges: Caterpillar is very likely to remain relevant as infrastructure spending becomes increasingly important. More and more contracting companies are going to be purchasing Caterpillar equipment in order to realize that ambition.
The other positive sign is that infrastructure is one of the very few issues that Democrats and Republicans can agree on. In other words, CAT stock is not controversial.
Leggett & Platt (LEG)
Leggett & Platt (NYSE:LEG) stock is a company with a history dating back to its 1883 founding. The company operates in decidedly unsexy markets, including bedding, car seating, some aerospace and textiles.
It’s the kind of boring, steady business investors are likely to disregard and pass over in favor of flashier names engaged in flashier business. But inventors who do so should know this: Leggett & Platt has outperformed the NYSE composite by 53% over the past decade.
That’s the kind of performance that retirement investors should truly appreciate. LEG stock is underpinned by strong market positions in traditional businesses. It has a strong balance sheet with strong cash flow and a history of 50 consecutive dividend increases on an annual basis.
Global Partners LP (GLP)
Investors who believe petroleum and oil continue to have a strong future should consider Global Partners LP (NYSE:GLP) stock. The Waltham, Massachusetts firm buys, sells, stores and transports petroleum products to wholesalers and station operators.
The company is fairly stable, having met or exceeded earnings over the past three quarters. But what it lacks in stability relative to other names on this list, it makes up for with its dividend. That dividend currently yields a massive 10%.
It too has outperformed the NYSE composite by a wide margin, 71%, in the past decade. That’s one of the most obvious aspects of investing in relatively unheralded but steady stock names: There are often very strong finds outside of headline names. GLP stock is one of them.
Verizon (NYSE:VZ) stock is interesting because it provides stability and inherent growth opportunity. Consumers are going to continue to require telecommunications services in any market environment after all. That is very well reflected in VZ stock’s 0.38 beta.
In terms of being undervalued, Verizon is currently about 14% lower than its consensus target price exclusive of its 5% dividend. So, there’s a good chance it can rise on simple recession worries alone. Those are likely to increase as the year wears on and its low beta implies investors will flock to its relative security if and when turmoil heats up again.
But it also possesses inherent growth with its position as a 5G player. Buying VZ stock is not risky but does have strong upside. That’s a good combination for retirement investors.
Charter Communications (CHTR)
My colleague Josh Enomoto made a strong point about Charter Communications (NASDAQ:CHTR) stock when he was discussing Warren Buffett stocks a few months ago: Not only does its Spectrum brand cover 44 states, but it dominates in California, Texas and New York.
Those are the three biggest state economies and contribute to the overall economy in an outsized manner. So, Charter Communications’ dominance there is a strong tailwind.
Charter Communications doesn’t pay a dividend but there is plenty of upside nonetheless. In fact, there’s roughly 30% upside baked into target prices. Telecommunications is a steady industry that fits in well with retirement strategies and CHTR stock is seriously undervalued at present.
On the date of publication, Alex Sirois 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.