10 Stocks Every Retiree Should Own

Apple
It’s somewhat unusual to look to the technology sector for dividends and value, but Apple is no ordinary company. The company hauled in $215.6 billion in sales and $45.7 billion in profits in the 12-month period that ended in September 2016—more revenues and earnings in a year than just about any other company in the world. Apple’s hoard of cash and securities has swollen to $67.3 billion. The company has another $170 billion in long-term investments. It is now so cash-rich and profitable that it can afford to buy back massive quantities of its own shares and hike its dividend, which it has raised at an annualized pace of 10% over the past four years.

Apple might never achieve the growth rates it enjoyed when the iPhone was first ascendant. Profits, in fact, dipped 14.4% in fiscal 2016, compared with a year earlier. But analysts see earnings rising 9% in fiscal 2017 and 10% the following year, fueled by sales of a new iPhone that Apple will likely launch in late 2017 to coincide with its 10th anniversary on the market. Investors aren’t paying much for that growth, with the stock trading at about 13 times earnings, well below the P/E ratio of 17 for Standard & Poor’s 500-stock index. More dividend hikes are likely as Apple continues to rake in cash.

AT&T
Symbol: T
Share price: $42.66
Dividend yield: 4.6%
Price/earnings ratio: 15

The telecommunications services sector is well known for dividends, and AT&T offers one of the highest. The company has paid uninterrupted dividends since 1984 and has raised its payout annually for more than three decades. At the same time, AT&T’s payout routinely makes it one of the highest-yielding common stocks on the market—well above the 2.1% yield of the S&P 500.

Although phone service remains AT&T’s core business, the company is moving aggressively into pay-TV and content production with acquisitions such as DirecTV and a pending deal to buy Time Warner—an entertainment giant whose lineup includes CNN, HBO and the Warner Brothers movie studio. Analysts aren’t counting on the deal going through, due to antitrust issues. But even without it, AT&T’s profits should still rise by about 5% in 2017, providing plenty of cash for its next dividend hike.

Colgate-Palmolive
Symbol: CL
Share price: $65.89
Dividend yield: 2.3%
Price/earnings ratio: 23

Colgate-Palmolive is as old-school as they come. Demand for its brands of toothpaste, dish soap and other household goods might ebb and flow. But people are likely to keep buying these products even if the economy slows. That steadiness has allowed Colgate to pay dividends every year since 1895, and the company has increased its payout annually for more than 50 years.

Colgate’s income stream has made a big difference in its stock returns. Including dividends, the shares have returned a total of 110% over the five-year period that ended September 30, 2016. By comparison, the S&P 500 returned less than 95% in that stretch. Colgate derives 80% of its sales abroad, including 51% from fast-growing developing markets. A rising dollar would hurt its overseas business (by making sales and profits earned in foreign currencies worth less when converted to greenbacks). Even with those pressures, analysts forecast a 9% increase in Colgate’s profits in 2017.

Ford Motor
Symbol: F
Share price: $12.23
Dividend yield: 4.9%
Price/earnings ratio: 7

U.S. auto sales hit a record high in 2015. But the prospect of leaner times ahead has weighed on shares of Ford. The stock has slumped 6% this year, including dividends. Yet the market is treating Ford, with a P/E ratio of just 7, as if profits will fall off a cliff.

That doesn’t appear to be happening. Analysts estimate that earnings per share will inch up about 2% in 2017. That’s hardly great growth, but it should be enough to support Ford’s quarterly dividend of 15 cents per share. Investors can expect more dividend increases as long as auto sales remain solid.

10 Stocks Every Retiree Should Own
General Motors
Symbol: GM
Share price: $35.14
Dividend yield: 4.3%
Price/earnings ratio: 6

As with Ford, the case for investing in General Motors comes down to dividends and valuation. Only about three-dozen common stocks in the S&P 500 possess yields above 4%, GM being one of them. It’s also one of the few high-yield stocks that should easily cover its payout from profits generated by running the business. GM distributed just 24.1% of its profits as dividends in 2016, giving the firm ample room to cover its payout and hike it in the future. Analysts see earnings per share dipping to $5.83 in 2017, from $6 in 2016. But with a P/E ratio of 6, GM’s stock isn’t pricing in much, if any, growth. Even a slight boost in auto sales could make the stock a big winner.

International Paper

Symbol: IP
Share price: $53.37
Dividend yield: 3.3%
Price/earnings ratio: 16

As one of the world’s largest suppliers of paper and packaging materials, International Paper may not sound like an exciting business. But it possesses some attractive features. The company dominates the market for containerboard, giving it exposure to rising demand for packaging used by online retailers. For example, the company supplies half of Amazon.com’s shipping boxes. Analysts expect earnings to climb an average 9% a year over the next five years. The firm pays a healthy dividend, too, and it is income you should be able to count on. The company has paid uninterrupted dividends since 1993.