Most retirees prefer low turnover in their investment portfolios. The less drama, the better. That way, they can focus on doing what they enjoy instead of worrying about their investments.
Three Motley Fool contributors think they've found magnificent stocks retirees can buy and hold forever. Here's why they picked AbbVie (NYSE: ABBV) , Gilead Sciences (NASDAQ: GILD) , and Johnson & Johnson (NYSE: JNJ) .
A Dividend King poised for growth
Keith Speights (AbbVie) : There's arguably no group of stocks better suited for retirees than the Dividend Kings . These stocks have increased their dividends for at least 50 consecutive years. AbbVie is a member of dividend royalty thanks to its track record of 52 years in a row of dividend hikes.
Some Dividend Kings offer paltry dividend yields, but not AbbVie. The big drugmaker's dividend payout has soared nearly 45% over the last five years, with its yield currently hovering around 3.7%.
Even better, AbbVie is poised for solid growth. That might be surprising considering that sales are sinking for the company's top-selling drug, Humira, in the face of biosimilar competition. However, AbbVie has a strong stable of newer products that can take up the slack and then some.
Rinvoq and Skyrizi, both of which are successors to Humira in the autoimmune disease arena, stand out as AbbVie's strongest growth drivers. Antipsychotic drug Vraylar and migraine therapies Qulipta and Ubrelvy are also rising stars.
AbbVie's recent acquisition of ImmunoGen adds more firepower to its lineup. ImmunoGen's flagship product, cancer therapy Elahere, could generate peak annual sales in the ballpark of $2 billion within a few years.
Don't let AbbVie's trailing price-to-earnings multiple of nearly 51 scare you. The company's growth prospects make its valuation much more attractive.
A stable, low-risk dividend stock you can buy and forget about
David Jagielski (Gilead Sciences): Retirees seeking a solid, safe stock to buy and hold forever will probably like Gilead Sciences. The California-based pharma company has strong financials, generates modest growth, and pays a fairly high dividend. Gilead's stock also has an extremely low beta value of 0.22, which makes it an ideal option for risk-averse retirees who don't want to worry about the market's wild swings in value.
What's promising about Gilead is that the company has a strong core HIV business, which it can rely on for steady growth. It has also been investing in other areas of healthcare, including oncology and treatments for liver disease. The strong, diverse portfolio makes Gilead a fairly safe investment for retirees to hold on to. During the first three months of 2024, Gilead's HIV sales grew at a rate of 4%, liver disease revenue rose by 9%, and oncology sales increased by 18% year over year.
Acquisition-related charges have weighed on the company's bottom line, so Gilead's payout ratio may look alarmingly high at more than 800% of earnings. But from a cash flow perspective, investors get a better indication of its ability to pay dividends. In the trailing 12 months, Gilead has accumulated $7.9 billion in free cash , which is more than double the amount it has paid in dividends during that time frame ($3.8 billion). As a result, its dividend, which yields 4.4%, looks incredibly safe and sustainable.
Although the healthcare stock has generated just a modest 6% return over the past three years, when including its dividend, its total return is around 20%. Gilead may not generate huge gains for your portfolio in the short run, but if you want a reliable stock you can buy and hold forever, it can be an excellent investment to load up on today.
A steady, reliable dividend payer
Prosper Junior Bakiny (Johnson & Johnson): Retirees tend to value relatively safe, low-volatility stocks that offer regular dividend payouts. That describes Johnson & Johnson to a T. As one of the leading pharmaceutical companies in the world, the drugmaker boasts a deep lineup of medicines, including lifesaving ones, that remain in high demand regardless of economic conditions.
Physicians won't stop prescribing drugs such as Darzalex, which treats multiple myeloma, or immunosuppressant Tremfya, nor will patients be inclined to stop taking these medicines. Johnson & Johnson is also a medical device expert. It offers a range of products across several therapeutic areas, including surgery, vision, and more. Johnson & Johnson's leadership in the healthcare field is why it generates consistent revenue and profits.
Furthermore, the company's balance sheet is rock solid. Its triple-A credit rating from S&P puts it ahead of even the U.S. government . Translation: Johnson & Johnson's business might bend during economic troubles, but it is exceedingly unlikely to break. That's why the company has been around for over 100 years. Given its innovative capabilities, it should be around for much longer. So retirees can hold the stock for a while and profit from Johnson & Johnson's outstanding dividend program.
The company has raised its payouts for 62 consecutive years, making it a Dividend King. Johnson & Johnson's yield of 3.4% is well above the S&P 500 's average of 1.35%. Its cash payout ratio of about 64% looks reasonable. Though Johnson & Johnson is unlikely to offer explosive growth, retirees can find precisely what they are looking for with this top dividend stock.
David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in AbbVie. Prosper Junior Bakiny has positions in Johnson & Johnson. The Motley Fool has positions in and recommends Gilead Sciences. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy .
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