The 7 Best Retirement Stocks to Buy After Age 50

Some may believe that the best retirement stocks for investors over 50 are all ultra-conservative names with relatively high dividend yields, but one well-known investment advisory firm suggests that’s not the case at all.

Consequently, in compiling this list, I’ve tried to find a balance between very safe stocks and names that are likely to deliver significant capital appreciation over a one-to-five-year period.

I’ve also included a few stocks with high dividend yields. Dividends can either be used as a means of income and an inflation-combating strategy or reinvested in stocks. The latter approach is likely to produce greater total returns over time.

With that said, here are the seven best retirement stocks for investors over 50.

AT&T (T)

AT&T (NYSE:T) is one of the two large, very entrenched carriers that offer smartphone subscriptions. The company has an exceptionally stable business and is virtually guaranteed to keep growing, albeit slowly, for many decades to come.

In a move that greatly increased its stability, the firm sold off its cable channels and movie studio to Warner Bros. Discovery (NASDAQ:WBD) earlier this year.

Showing the strength of its mobility unit, which now accounts for about two-thirds of AT&T’s total sales, the division’s sales climbed 6% year-over-year in the third quarter. Moreover, AT&T increased its full-year earnings per share guidance, excluding some items, to at least $2.50, from its previous outlook of $2.42-$2.46.

Based on EPS of $2.50, T stock has a very low price-earnings ratio of 7.7 (19.28/2.5). Throw in the shares’ high dividend yield of 5.8%, and it’s easy to see why T is one of the best retirement stocks for investors over 50.

McDonald’s (MCD)

In a previous column, published on Aug. 29, I wrote that McDonald’s (NYSE:MCD) “is a good defensive stock because many working-class and middle-class families will start eating there instead of more expensive restaurants if the economy turns south.”

On Oct. 27, Seeking Alpha wrote that McDonald’s Q3 results showed the trend I predicted is indeed playing out, as the chain is “attracting more higher-income customers, who are…trading down to fast food from full-service dining.”

McDonald’s ability to thrive in all types of macroeconomic environments makes it one of the best retirement stocks for investors over 50.

Moreover, MCD has become such a core part of American culture — and consequently a magnet for lovers of American culture in much of the rest of the world — that its business is sure to thrive for decades to come.

The stock has a reasonable forward price-earnings ratio of 26 andcarries a substantial, 2.2% dividend yield.

IBM (IBM)

Under CEO Arvind Krishna, who became CEO of the tech giant in April 2020, IBM (NYSE:IBM) is no longer your father’s Big Blue. Indeed, the company shed its least profitable units earlier this year and is rapidly becoming a formidable contender in the lucrative cloud sector.

As evidence of the latter assertion, consider that, last quarter, as I noted in a previous column, its ” hybrid cloud sales soared 20% YOY, excluding currency fluctuations,” while it acquired a “couple of hundred hybrid cloud platform clients in” Q3.

Also noteworthy is that it anticipates generating a hefty free cash flow of roughly $10 billion this year, while its consulting revenue soared 16% YOY. Its “operating pre-tax margin” came in at a relatively low 14%, indicating that it can greatly increase its profitability as its businesses continue to ramp up and economic fears diminish.

Citing IBM’s “constructive outlook,” Morgan Stanley kept a $152 price target and an “outperform” rating on the shares.

Big Blue has a 4.5% dividend yield and a relatively low forward price-earnings ratio of 15.4.

General Motors (GM)

The U.S. automaker is showing that it can thrive during periods of macroeconomic adversity, and it looks very well-positioned to become a leader in the rapidly growing electric vehicle sector.

As I noted previously, GM (NYSE:GM) “blew past analysts’ profit estimates when it reported third-quarter results, producing $2.25 in earnings per share compared with an expected $1.88 a share,” while its revenue jumped an impressive 58% YOY.

Reacting to the results, Citi reiterated its view that GM remains the top name in the auto sector. The firm expects the company’s results to beat analysts’ average outlook going forward, and it raised its price target on GM stock to $81 from $78 while maintaining a “buy” rating on the shares.

Meanwhile, GM’s Bolt and Bolt EVs are generating strong sales growth, while the orders for its Hummer and Cadillac Lyriq EVs are coming in much faster than the company can produce them. Within the next year, GM is going to unveil electric versions of three of its most popular trucks –the Silverado, the Equinox and the Blazer.

Despite all of those positive catalysts, GM stock has an extremely low forward price-earnings ratio of just 6.5.

Merck (MRK)

With all the excitement and news about the coronavirus vaccines in the last couple of years, there has not been much talk about one of the world’s most successful and profitable drug makers, Merck (NYSE:MRK).

However, propelled by its very lucrative cancer treatment, Keytruda, and its very widely used HPV vaccine, Gardasil, Merck continues to post very strong financial results.

For example, last quarter, its top line jumped 14% YOY to $14 billion, while it generated EPS of $1.85, 14 cents above analysts’ average outlook. Its revenue from Keytruda climbed 26% YOY, excluding currency fluctuations, to $5.4 billion. Gardasil’s sales rose 20% YOY, excluding currency fluctuations, to $2.3 billion.

On Oct. 10, research firm Guggenheim upgraded MRK stock to “buy” from “neutral.” The firm expects the company’s financial results to beat expectations in 2023. It thinks that Keytruda’s patent could be extended to 2030 from 2028. It placed a $104 price target on MRK.

The forward price-earnings ratio of MRK is an undemanding 14.2, while it offers a 2.7% dividend yield.

O’Reilly (ORLY)

Auto-parts retailer O’Reilly (NASDAQ:ORLY) is benefiting tremendously from a strong trend that seems likely to continue indefinitely.

Americans keep extending the number of years that they keep their vehicles. Consequently, more vehicles are undergoing repairs, increasing the demand for auto parts.

In Octiber, CNN reported that, “Americans are holding on to their cars longer and longer. The average car on America’s roads today is over 12 years old, according to S&P Global Mobility. And it’s likely only going to get even older.”

Benefiting from these trends, O’Reilly delivered very strong Q3 results. Its revenue soared 9% YOY to $3.8 billion, coming in $90 million above analysts’ average estimate. It generated Q3 EPS of $9.17, 68 cents above the mean estimate.

Seeking Alpha noted that ORLY “reported [a] 7.6% increase in comparable store sales and an incredible three-year stacked comparable store sales increase of 31.2%.”

Given the company’s strong growth, ORLY’s forward price-earnings ratio of 23 is reasonable.

Citizens Financial (CFG)

Citizens Financial (NYSE:CFG) appears to be benefiting from a number of secular trends. For Q3, it reported EPS of $1.30, while its revenue soared 32% YOY to $2.17 billion.

Its net interest income jumped 11% versus Q2, while its net income climbed to $636 million last quarter from $530 million during the same period a year earlier. Further, the average value of its loans and leases jumped to $156.9 million from $122.6 million during the same time a year earlier.

“Our balance sheet management strategies have delivered stable deposits and attractive commercial loan growth. Credit metrics remain favorable, and we feel well-prepared for changes in the macro environment,” said Citizens CEO Bruce Van Saun in a statement.

On the date of publication, Larry Ramer did not hold (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.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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