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We Fools are big believers that investors in every age group can benefit from owning stocks. That's especially true in today's low interest rate environment, where yields on bonds and CDs are simply too low to provide many retirees with the income they need to supplement their Social Security checks.
Of course, that doesn't imply that investors who are 70 years or older should buy just any stock. In fact, they should be quite picky about the stocks they choose to buy. In general, they should be focused on selecting business that are stable, offer long-term growth potential, and pay a solid dividend.
With that in mind, here are three companies that I think are great choices for these investors to consider:
A dominant healthcare retailer
Each day, nearly 10,000 Americans turn 65. Believe it or not, that trend is projected to persist for at least 13 more years, which will almost certainly increase the demand for prescriptions drugs and low-cost healthcare in the years ahead. One company that's perfectly positioned to benefit from that demographic trend is CVS Health (NYSE: CVS).
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When you think of CVS Health as an investment, it's likely that you picture continued growth in its retail pharmacy empire. You'd be correct for doing so, especially as the company rolls out more of its in-store clinics -- called MinuteClinics -- that offer basic healthcare services in a convenient and low-cost way. The aging population will almost certainly drive increased demand for the company's pharmacy services, too, which should drive traffic gains for years to come.
However, you might not be aware that CVS Health also runs one of the largest pharmacy benefits management businesses in the country as well. This business helps other entities that provide healthcare -- think unions, governments, employers -- to save money on their pharmacy costs. This business is all about scale, and CVS Health's massive size gives the company a decisive edge over small rivals, which is a big reason its customer retention rate is a stellar 97.5%.
An aging population will increase demand for both of these businesses, which should provide CVS Health with decades of revenue and profit growth in the years ahead. With a fast-growing dividend that yields 1.8%, a stable business model, and price-to-earnings ratio that is below the market's average, I think this is a stock that investors of any age can learn to love.
Image source: CVS Health.
An energy company with consistent growth
Energy prices are notoriously cyclical, which can cause investors in the space to often experience whiplash when prices rise or fall dramatically. Thankfully, not every energy company is reliant on the price of energy commodities to hit its numbers.Spectra Energy (NYSE: SE), for example, is a natural-gas-pipeline operator that derives 95% of its revenue from fee-based assets. That fact greatly insulates the company's revenue and profit from extreme fluctuations in energy prices.
Better yet, even in today's volatile energy market, Spectra Energy continues to find new ways to grow. The company recently won a $1.5 billion pipeline project with aMexican state-owned power utility, which raised its backlog of projects to $10 billion. That's a huge chunk of work that will be coming on line in the years ahead, which is why the company is expecting to drive $1 billion in incremental EBITDA (earnings before interest, taxes, depreciation, and amortization) by the end of the decade.
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Looking ahead, Spectra Energy has promised to pass on its increasing profits back to investors in the form of a rising dividend. The company has committed to annual raises of $0.14 annually between now and 2018, which represents high-single-digit growth from today's $1.62 annual payout. Since the company hasmet or exceeded its dividend growth target for nine consecutive years, I like its chances of delivering on those promises.
With a current yield of 4.5% and strong prospects for growth on the way, this is a great stock for older investors to consider buying.
The top dog in wireless
It's no stretch to say that Americans have become addicted to using their smartphones, which tends to keep them paying their bills even when times get rough. That fact has greatly benefited Verizon Communications(NYSE: VZ) over the past few years, making thiscompany a great choice for investors who seek stability.
Last quarter, Verizon posted a staggering 113.2 million connected devices on its network, which was up 3.3% year over year. Better yet, the company's customers have proven themselves to be extremely loyal, as Verizon'sretail postpaid churn rate was only 0.94% last quarter. That's the best rate among the four biggest wireless carriers in the country. That loyalty likely stems from the fact thatVerizon is consistently ranked as the top wireless provider in the country.
One benefit that comes with investing in a nationwide telecom is that investors don't have to worry about an upstart coming in and eating the company's lunch. After all,owning and operating a nationwide cellular network isextremelycapital-intensive.Verizon spent more than $27 billion last year on maintaining and upgrading its network -- very few companies can afford this kind of spending.
Looking ahead, I think investors should continue to expect modest growth from Verizon.With more devices predicted to come online over the next few years thanks to the Internet of Thingstrend, the demand for Verizon's services is likely to remain resilient.
In the meantime, Verizon has a long history of sharing its profits with investors. The company's dividend yield is currently 4.2%, and has consistently been pushed higher over the last decade.
I think investors should expect more of the same in the years ahead, which makes Verizon a great dividend stock for investors who seek stability and income.
Investors who are 70 or older shouldn't feel the need to completely shy away from the stock market, as there are plenty of great companies that they can buy that are on sound financial footing. Buying a basket of strong dividend-paying stocks with good growth prospects can be a great way for these investors to supplement their income in their golden years.
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The Motley Fool owns shares of and recommends Spectra Energy and Verizon Communications. The Motley Fool recommends CVS Health. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.