Many retirees are investors for a good reason: They can’t rely solely on Social Security to fund their retirement. Investing wisely offers a way to retire comfortably.
Three Motley Fool contributors think they’ve found stocks to buy that retirees should love. All three offer juicy dividend yields. Here’s their case for it AbbVie (NYSE: ABBV), Bristol Myers-Squibb (NYSE: BMY)And Gilead Sciences (NASDAQ: GILD).
Everything retirees need in a stock from A to V
Keith Speights (AbbVie): Reliable income (the more the better) and reasonable growth prospects. These are the top items on retirees’ wish lists when choosing stocks. AbbVie offers both.
The big pharma’s forward dividend yield is nearly 3.3%. It was higher earlier this year, but AbbVie’s stock price is up more than 20%. That’s not a bad problem to have.
Few companies beat AbbVie when it comes to dividend reliability. It’s a Dividend King with 52 consecutive years of annual dividend increases (including when it was part of Abbott Laboratories). Over the past five years, the company has increased its dividend payout by almost 45%.
AbbVie’s strong profits so far this year give you a sense of the company’s growth prospects. The performance may come as a surprise, given that the drugmaker’s revenue and profits have been falling due to the expiration of the patent on Humira, its blockbuster autoimmune therapy.
However, AbbVie has done a great job of planning for Humira’s loss of exclusivity. The company already has two worthy successors on the market that together should surpass Humira’s peak sales within the next few years. AbbVie has also invested in research and development and made several strategic acquisitions that have improved its growth prospects.
This dividend stock is a good investment with low volatility
David Jagielski (Bristol Myers Squibb): If you’re retired, Bristol Myers Squibb is probably one of the stocks you’ll love. The healthcare company has a great track record of growth and acquisitions over the years, and it pays a solid dividend.
While the stock has struggled this year, losing more than 7% of its value year to date, it is a fairly stable investment with a beta value of less than 0.5.
The company has faced challenges from losing exclusivity on several top drugs this decade, including Eliquis and Opdivo. But it has been accumulating assets over the years to build its portfolio of new growth products.
In the most recent quarter, which ended June 30, sales from the growth portfolio rose 18% to $5.6 billion. And by 2026, Bristol Myers expects its new products to generate at least $10 billion in sales.
There will always be risk with biopharmaceutical companies, because patents on new drugs don’t last forever. But with Bristol Myers, the company is already preparing for losses in exclusivity by bolstering its drug list and improving its pipeline.
And it’s paid dividends for more than 90 years in a row, and increased them annually for 15 years in a row. And with a yield of nearly 5%, investors can collect more than three times as much as they would with the average S&P 500 shares, which pay out about 1.3%. The company’s earnings per share in the most recent period were $0.83, which is well above the $0.60 dividend it pays out each quarter.
For retirees, Bristol Myers is a good, stable investment to buy and hold. While investors may be put off by the uncertainty it faces, it is not as risky as it seems. I think it could be an excellent source of recurring income for your portfolio.
A reliable dividend payer
Prosper Junior Bakiny (Gilead Sciences): Once investors reach retirement age, they typically aren’t looking for risky, high-growth stocks. Instead, they want stable, reliable companies that pay regular dividends. Gilead Sciences is an excellent choice in that regard.
The biotech’s portfolio of drugs includes products in oncology, virology and HIV, where it is a leader. Gilead has the world’s best-selling HIV drug in Biktarvy. It was the fifth-best-selling drug in the industry last year. The company should continue to move in the right direction and gain market share, as it usually does.
Gilead won’t be relying solely on its HIV portfolio, however. The company has made significant investments in oncology, where it hopes to become a leader. Sales of oncology treatments have grown faster than the rest of its business in recent quarters, though they still represent a relatively small portion of total sales. The biotech is working hard to develop new products.
The pipeline has dozens of programs, with a specific focus on oncology, HIV and inflammation. Gilead’s ability to innovate, coupled with the fact that patients are not likely to stop taking its drugs even when the economy is bad, positions it to deliver stable financial results over time.
The biotech’s dividend record is also solid. Over the past five years, Gilead Sciences has increased its payout by 22%, while its forward yield currently stands above 4.15%.
In my opinion, retirees and people looking for an income cannot make a wrong choice with this option.
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David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in AbbVie and Bristol Myers Squibb. Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories, Bristol Myers Squibb and Gilead Sciences. The Motley Fool has a disclosure policy.
3 Stocks Retirees Should Absolutely Love was originally published by The Motley Fool
