Investors in their 60's should start to favor low-risk stocks that offer up big dividend payouts. Below are three stocks -- Waste Management (NYSE: WM), United Parcel Service (NYSE: UPS), and Welltower (NYSE: HCN) -- that perfectly fit that description.
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One man's trash...
The waste-management sector is a terrific place to find low-risk stocks. Most trash haulers operate mini-monopolies since it makes no sense to send multiple garbage trucks down the same streets. That's because trash is quite heavy and holds almost no economic value. That fact gives any company that owns a fleet of trucks and landfills that are close to populated areas a dependable stream of income.
Given those industry dynamics, I think that Waste Management is a terrific choice for conservative investors. This company is the biggest trash hauler in North America, and it owns hundreds of transfer centers, landfills, and recycling centers spread around the continent.
Waste Management's giant empire services more than 21 million customers, which makes its business quite predictable. In addition, waste hauling is a recession-resistant industry -- garbage production doesn't stop just because the economy is sluggish. These factors allow Waste Management to crank out free cash flow, which the company uses to reward shareholders.
This might not be the sexiest business in the world, but Waste Management is a low-risk stock that offers up a dividend yield of 2.4%. That makes it a sound choice in my book.
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A backdoor way to play e-commerce
You've likely noticed that consumers are increasingly shifting their shopping online. That doesn't bode well for the prospects of brick-and-mortar retailers, but it does provide a tailwind for package-delivery companies.
United Parcel Service and FedEx are both package-delivery giants that are poised to benefit from the continued rise in e-commerce sales. Both companies also enjoy enviable moats that are protected by the network effect, and both are heavy-assets investments, making it extremely difficult for any potential competition to enter this business. That gives both companies a decent amount of pricing power.
While both companies are well positioned for long-term success, I think that UPS is the better bet for investors in their 60's today, since it offers up a much higher dividend yield of 3.1%. In addition, the company's margins are currently being held back by big investments to help grow the business. While that is depressing both margins and profits in the short term, those investments should prove to be a tailwind for earnings down the road.
Shifting demographics make this stock attractive
With 10,000 baby boomers retiring every day, the demand for healthcare is almost certain to rise for years to come. Healthcare real estate investment trust (REIT) operator Welltower offers investors a low-risk way to ride the trend.
Welltower owns a vast empire of healthcare properties that are spread throughout the U.S. The majority of the company's properties cater to needs of seniors -- think independent-living, assisted-living, and memory-care facilities -- but it also owns a handful of other healthcare properties such as outpatient medical facilities and post-acute care centers.
Welltower has recently been selling off its facilities that are dependent on public fundsand using the proceeds to buy facilities that are funded by private payers. I think this is a brilliant idea, as it helps to reduce the company's exposure to public payers like Medicare and Medicaid.
Looking ahead, Welltower's opportunity for expansion is truly massive. The healthcare real estate market is estimated to be worth $1 trillion, and the company "only" boasts a market share of 3%. That should provide Welltower with decades of room for slow and steady growth. With the company's long history of sharing those profits back to shareholders, that hints that investors can count on regular dividend increases from here.
All in all, Welltower is a low-risk stock that looks well positioned for success. With a market-topping yield of 5.3% and growth on the horizon, I think this stock is an ideal choice for older investors.
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Brian Feroldi has no position in any stocks mentioned. The Motley Fool owns shares of Waste Management. The Motley Fool recommends FedEx, United Parcel Service, and Welltower. The Motley Fool has a disclosure policy.