The 3 Best Stocks to Own in Retirement

By Markets Fool.com

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Source: Aetna.

All that great planning during your working years has left you with a handsome investment portfolio for retirement, but the stocks that got you to where you are today may not be the best to own during your golden years. We asked three Motley Fool contributors to tell us which stocks they think make the most sense for retirees. Read on to learn which three they picked.

Keith Speights:What kind of stock is the perfect fit for retirees? I'd say one that is highly likely to remain a viable business for decades to come. A steady and growing dividend would certainly make the criteria list. A good opportunity for growth would be nice to have also.Johnson & Johnson checks all these boxes.

Stability is a big plus for J&J. The healthcare giant has been around since 1886. Multiple generations have used many of J&J's products, from Band-Aids to Listerine. If you fell asleep like Rip Van Winkle and didn't wake up for 20 years, it's likely you would still find store shelves full of products made by J&J.

Dividends are another big plus for J&J shareholders. The company's dividend has grown every year for the past 51 years. J&J's current dividend yield is a strong 2.6%. With a payout ratio of 45%, the company is generating plenty of earnings to keep those dividend payments coming.

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Then there are the growth opportunities. Healthcare is hot and should remain that way for a long time to come. J&J's healthcare portfolio extends from consumer products to prescription drugs to medical devices, with new innovations on the way. No stock is totally perfect for retirees, but J&J comes close.

Leo Sun: Microsoft stock offers two great things for retirees -- market dominance, steady price growth, and generous dividends. Despite claims that Microsoft's growth has slowed down, its annual revenue improved 118%, and net income rose 80% over the past decade. Over those 10 years, the stock rallied 74%.

AppleiOS and Google Android devices marginalizedWindows smartphones and tablets, but Microsoft still dominates over 90% of the global PC market. Microsoft also controls the enterprise market, since large businesses tend to store legacy data and software on Windows systems, preventing them from swapping to Macs or Chromebooks. Microsoft is also bouncing back in mobile devices with hybrid ones like the Surface Pro 3, and it will finally launch Windows 10 -- its unified OS for PCs, tablets, and phones -- next year.

Microsoft has raised its quarterly dividend every year since 2005. In September, Microsoft raised its dividend 11% to $0.31 per share. That gives the stock a forward annual dividend yield of 2.6% and a trailing-12-month payout ratio of 44%. That's considerably more generous than Apple, which has a forward annual dividend yield of 1.6% and a trailing payout ratio of 28%.

For a basic "buy and forget" stock, Microsoft offers a solid balance of stability, growth, and reliable income for retirees.

Patrick Morris: Warren Buffett'sBerkshire Hathaway may not be the typical investment for retirees because it doesn't pay a dividend, but it nonetheless should be in their portfolios, and probably those of anyone else for that matter. There are a number of reasons why.

First, there's the long history of incredible performance. Over the past 30 years, a single "A" share has grown from $1,395 in value to $224,800, good for an average annual return of 18.5%. By comparison, the S&P 500 has returned 8.5%, meaning that same $1,395 at the beginning of 1985 would be worth just $15,800.

Next is the incredible diversity it provides. Yes, we know of Buffett's massiveinvestment portfolio, but there's also the reality that Berkshire owns multiple insurance businesses (includingGEICO), one of the largest railroads in America (Burlington Northern Santa Fe), an energy arm that spans the country, and a litany of manufacturing and other businesses.

The nearly $7 billion in pre-tax income Berkshire has made through the first nine months of 2014 has come from a truly diverse stream of earnings. In Buffett's own words from earlier this year: "Berkshire now owns eight and a half companies that, were they standalone businesses, would be in the Fortune 500. Only 491 and a half to go."

Finally, it must be said that just because Berkshire doesn't pay a dividend on its own, that doesn't mean income can't be generated from it. Let's say an individual owned $100,000 worth of Berkshire shares, and wanted a 4% yield. And let's say that instead of the historical Berkshire return of 18.5%, it gets cut by roughly one-third to 12.5%.

After 15 years, by selling off 4% of the shares each year, you would collect $122,000 in "dividends." But how much would the remaining shares be worth? Nearly $320,000.

In other words, you can generate both great income and great returns with Berkshire, making it one of the best retirement stocks you can own.

The article The 3 Best Stocks to Own in Retirement originally appeared on Fool.com.

Keith Speights and Leo Sun are long Apple. Patrick Morris is long Apple,Google, Johnson & Johnson, and Berkshire Hathaway. The Motley Fool recommends Apple, Berkshire Hathaway, Google (A and C shares), and Johnson & Johnson and owns shares of Apple, Berkshire Hathaway, Google (A and C shares), Johnson & Johnson, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.