20 Stocks for Your Portfolio During Retirement

by: Avi Morris

Investing for retirement has changed significantly in modern times. Previously retirement investing meant selling stocks (typically with low yields) and reinvesting that money in high grade bonds with higher and dependable yields. Capital preservation was all important. The background for this thinking was that retirees would live quietly and life expectancy was not long. Now many retirees have more active lives and life expectancy is longer. At a retirement age of 65, many expect to live for 20-30 years, and, more importantly, enjoy a much higher quality of life than in the past (some work full or part time). Lifestyle changes make it necessary to rethink investment objectives and a longer life expectancy requires a more aggressive approach for growing investment values.

Dividend Aristocrats with moderate yields and growing dividends are presented below (with stock symbols, annual dividends and current yields) for long term investing during retirement:

Leggett & Platt..(NYSE:LEG)__$1.08__4.2%
Abbott Labs..(NYSE:ABT)__$1.92__3.7%
Johnson & Johnson..(NYSE:JNJ)__$2.28__3.4%
RPM International..(NYSE:RPM)__$0.84__3.6%

Procter & Gamble..(NYSE:PG)__$3.20__3.2%
McDonald's Corporation..(NYSE:MCD)__$2.44__3.0%

Coca-Cola Company..(NYSE:KO)__$1.88__2.8%
Automatic Data Processing..(NASDAQ:ADP)__$1.44__2.7%
VF Corporation..(NYSE:VFC)__$2.52__2.6%
Exxon Mobil..(NYSE:XOM)__$1.88_2.3%
Stanley Black & Decker..(NYSE:SWK)__$1.64__2.2%

Sherwin Williams (NYSE:SHW)__$1.46__1.7%
W.W. Grainger..(NYSE:GWW)__$2.64__1.8%
Brown Forman..(NYSE:BF.B)__$1.28__1.8%
Dover Corporation..(NYSE:DOV)__$1.10__1.7%

These companies provide yields of 1%-4% and have records of growing annual dividends for a minimum of 25 consecutive years. More importantly, they continued increasing dividends through an unusually severe recession in recent years, when many of the strongest did not. A wide variety of businesses are included for diversification purposes. KO has been the leader in nonalcoholic beverages for 125 years, PEP adds snack food products and BF.B has been a leader in alcoholic beverages for 14 decades. KMB, PG, MCD and VFC have some of the best known brand names in the world. SWK has paid dividends annually since 1877 and XOM since 1882 (when it was part of Rockefeller's Standard Oil). KO, JNJ and PG have been increasing annual dividends for (roughly) have a century.

Past records provide no guarantees, nevertheless give a strong indication that long streaks will be extended going forward. Reinvested dividends add to investment growth. But dividends provide only a portion of total gains, the rest comes from capital appreciation. These companies have a variety of track records of growth. Generally ones with higher yields have more modest records of stock growth while the ones with lower yields have higher growth rates (as written in text books).

The concept of capital growth should not be forgotten or discarded during retirement years. Growth in investment portfolios increase the value of the estate. More importantly, larger investments provide additional funds in later years when expenses can rise dramatically. Each person must decide what balance of income and growth is appropriate, but growing investment worth should be considered an essential objective. With more of the population living active lives in their 70s, 80s and even 90s, Dividend Aristocrats are excellent investments, which have rewarded stockholders with dividend growth and capital gains. Investing in retirement years requires as much attention as in prior years. Long term goals shouldn't change much in later years, growth remains a key consideration.

Disclosure: I am long KO, VFC.