Worried about retirement? Buy these stocks and sleep easy

 

Retirement… something we all dream about. The thought of enjoying the golden years and passing the time traveling and spending time with friends and family is a wonderful thought, but it can be stressful thinking about how to ensure that our retirement years are paid for.

Winning the lottery would be nice, but the reality of the situation is that you have to plan for retirement, making slow and steady progress in reaching the ultimate goal.

Investing is a great way to prepare for your retirement years, but if you are in the wrong stocks, you can watch your nest egg slowly erode as opposed of steadily increasing in value. It can be stressful, and while we can easily find ourselves investing with the hope of quick gains, the reality is that we invest for the long-term, with the final goal being financial independence by the time we hit retirement.

This means that you need to find stocks with excellent long-term potential. Ideally, but not necessarily, these stocks should be income providers through the year which help to increase your positions and let your money do the best possible job working for you.

Whether you are just entering the workforce or find yourself in the latter part of your working career, it is never too late (or early) to start thinking about your retirement.

If you are you worried about your retirement, consider these five stocks that will help you sleep a bit easier knowing that your money is working as hard for you as you are for it.

Amazon.com

I absolutely love Amazon.com (AMZN) stock. The one big negative is that the company does not pay out any dividends, and while that could change over time, for now I am willing to overlook its lack of dividend due to the knowledge that the company is putting its revenues to work back into the company to expand and improve its underlying businesses. The company that humbly began as an online book and music retailer has literally altered the world as we know it, and it continues to look for new sectors to overtake. The company is obviously the leader when it comes to e-commerce, and it has emerged as a leader in cloud computing, has a successful hardware division, has made a bold move into the grocery sector with its Whole Foods acquisition, has over 100 million Amazon Prime members, and is expected to make waves in the pharmaceutical sector as well. Amazon has so many successes through the years that it is incredibly hard to bet against it moving forward. It is so far ahead of anyone else in e-commerce that it would be incredibly difficult for another company to overtake it, and with e-commerce only growing in importance, Amazon is going to be a powerhouse for years, if not decades to come.

Chart courtesy of www.stockcharts.com

Chevron

Make no mistake about it, oil can be a volatile commodity. We only have to look back a few years to see how big of a hit oil and gas stocks like Chevron (CVX) took when oil came under pressure in 2014. Having said that, the world will always need oil. In the future, there will be an even greater need for energy companies to move into renewable energy, but the demand for oil will always exist, and since there is only a finite amount of the precious crude in the ground, it will become more and more valuable over time. There will be ups and downs in terms of supply and demand, the long-term outlook remains very bullish, and leaders in the sector like Chevron will always prosper in the good times. The oil sector has huge barriers of entry, making it unlikely that a new company will sprout up and challenge Chevron and other oil giants like Exxon Mobil (XOM). Chevron’s long-term trend is positive despite some hiccups along the way, and with a hefty 3.6% dividend yield, the stock offers some nice income that you can use to either build positions in other stocks or use to reinvest in your CVX holdings to increase your position in the stock over the years. Oil stocks will always cause some stress, that is the nature of commodities in general, but the long-term outlook is favorable, and you should definitely have some exposure to the sector in your retirement planning.

Chart courtesy of www.stockcharts.com

Merck

There will always be some things that remain in demand regardless of overall economic conditions, and prescription medicines fall into that category. The U.S. population is aging as the baby boomer generation ages, and the unfortunate reality is that as populations age, the demand for health care products increase. This is why I believe it makes sense that any long-term portfolio planning should include a pharmaceutical company, and among them I like Merck (MRK) the best. The company has a big hit on its hand currently with its cancer-fighting drug Keytruda, and it has a lot of new drugs coming down the pipeline, in particular a new Alzheimer’s drug that analysts believe could eventually produce $5 billion in annual sales for the company. In addition, the stock offers a nice 3.2% dividend yield.

Chart courtesy of www.stockcharts.com

McCormick & Company

Spice maker McCormick & Company (MKC) is far from sexy, but its long term value and its market domination make it a very attractive stock to buy and hold forever. One thing that will never diminish is the need for food, and as the world’s populations expand, that demand will only grow. McCormick is a strong market leader, which provides it some cushion in the event of a market downturn, and since food-related products are consumer staples, its products will always enjoy a steady level of demand. You should not expect to see huge growth numbers for the stock, but analysts forecast earnings will rise by 10.5% per annum over the next five years, which is very respectable for company as mature as McCormick. The stock has steadily increased in value through the years, and with earnings expected to rise in the double-digits moving forward, there is nothing to prevent further gains down the road. Add in the fact that the stock offers a 2.0% dividend yield with a 31-year streak of dividend increases, and you get the perfect stock to buy and hold, and once retirement hits you will be able to enjoy the nice quarterly distributions that the stock offers for additional income.

Chart courtesy of www.stockcharts.com

PowerShares Dividend Achievers

The last pick is an exchange-traded fund (ETF). I like having at least one ETF in my long-term portfolio because while they have lower upside potential, you have the peace of mind knowing that the fund is diversified over a basket of stocks so the downside risk is minimized. A lot of investors prefer to use index funds, but I like the PowerShares Dividend Achievers (PFM) fund. The fund invests in the dividend achiever, meaning that it holds that have boosted their dividends for a minimum of ten consecutive years. Dividend stocks tend to be less volatile than non-dividend paying stocks, and those stocks that have long track records of annual dividend increases are even less volatile. This is because the market appreciates the fact that the company has managed to increase its distributions through the years, and shows management’s belief in the strength of the business moving forward. Among PFM’s top holdings are Exxon Mobil (XOM), Microsoft (MSFT), Johnson & Johnson (JNJ) and Walmart (WMT). The length of their dividend streaks spans from 14 years for Microsoft to an amazing 55-year streak of dividend increases for Johnson & Johnson. PFM is a great buy and hold, and currently offers a 2.0% yield.

Chart courtesy of www.stockcharts.com

Symbols: AMZN CVX MKC MRK PFM
Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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