3 Dividend Stocks Ideal for Your Golden Years

Markets Motley Fool

Let's face it: Not every stock is a good pick for you in your golden years. You don't want to be saddled with risky and volatile stocks. Instead, you need stable and steady stocks with solid business models -- and solid dividends.

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We asked three Motley Fool investors which stocks they would recommend for individuals in the prime season of life. Here's why they picked Brookfield Property Partners (NYSE: BPY), Microsoft (NASDAQ: MSFT), and Johnson & Johnson (NYSE: JNJ).

The total package

Matt DiLallo (Brookfield Property Partners): For most investors, the focus during their golden years is wealth preservation rather than wealth creation. That's why a slower-growing dividend payer like Brookfield Property Partners is an ideal investment: It offers inflation-beating income with less risk than growth stocks.

What makes Brookfield Property Partners unique when compared to other real estate companies is its diversification both globally and across property classes. At its core, the company holds nearly 150 top-tier office properties in some of the best cities in the world, as well as more than 125 of the top-performing malls in America. In addition, Brookfield is building a core urban multifamily portfolio from scratch, and it has invested 20% of its capital into opportunistic properties that offer higher upside, including multifamily, industrial, self-storage, student housing, and manufactured housing.

This world-class portfolio brings two things to the table: steady cash flow and appreciation upside. The stable cash flow comes from the fact that Brookfield has leased more than 90% of the available space in its core portfolio under long-term contracts. Meanwhile, the upside comes from the company's ability to collect higher rents in the near term through inflation escalations, as well as capturing higher market rates when current leases expire. Because of that built-in upside from its current portfolio, as well as development and redevelopment projects it has underway, Brookfield expects to grow its distribution to investors by 5% to 8% annually over the long term.

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That's healthy growth for a top-notch payout that already yields more than 5%. Furthermore, that dividend should be sustainable throughout market cycles, since Brookfield only pays out 80% of its cash flow and has a solid balance sheet backed by an investment-grade credit rating, a low leverage ratio of 50% debt to capital, and primarily fixed-rate debt. Those sound financial metrics make Brookfield Property Partners a low-risk company that those living in their golden years can bank on.

A buy-and-hold tech stock

Tim Green (Microsoft): Every technology company, no matter how dominant, can be disrupted. Microsoft is no exception, but the company has shown in the past few years that it's more than capable of adapting. The company's push into cloud computing has made it the No. 2 player behind Amazon Web Services, and its main cash cow, Office, still dominates its field despite increased competition.

Microsoft isn't the highest-yielding dividend stock, with a yield of just 2.2%. That's mostly due to a surge in the stock price over the past few years. Investors who bought Microsoft stock at the start of 2013 have seen their shares gain about 160%. This run has also stretched Microsoft's valuation a bit. Based on the average analyst's adjusted earnings estimate for this year, shares of Microsoft trade for around 23 times earnings.

Still, Microsoft has a lot going for it. In addition to the continued dominance of Office and the fast-growing cloud business, Microsoft has a potential game-changer up its sleeve with its HoloLens headset and Windows Mixed Reality. Augmented-reality headsets like the HoloLens have the potential to be the next great shift in computing, and Microsoft is leading the charge.

There are stocks that pay better dividends, and there are stocks that trade at lower valuations. But if you want a technology stock to buy and hold through your golden years, Microsoft is a good choice.

A longtime (and long-term) healthcare favorite

Keith Speights (Johnson & Johnson): When you're in your retirement years, the last thing in the world you want is uncertainty in your investments. You instead want a stock that's reliable over the long run. You want a stock like Johnson & Johnson.

There's a good chance that you use at least one of J&J's products. The same could probably be said for your children, as well as your parents -- and perhaps even grandchildren and grandparents. Johnson & Johnson's products range from consumer items like baby shampoo to over-the-counter medications like Tylenol to prescription drugs like Stelara. And there's a whole lot more, including orthopedic devices and surgical instruments.

When it comes to dividends, Johnson & Johnson is kind of like Old Faithful, the famous geyser in Yellowstone National Park. The company has increased its dividend for 54 consecutive years, landing it a spot in the elite group of stocks known as Dividend Aristocrats. J&J's dividend currently yields 2.55%.

But will Johnson & Johnson's future live up to its past? I think so. The company invested over $9 billion in research and development last year. That's important to J&J's continued success. In addition, Johnson & Johnson continually evaluates business development opportunities, with the acquisitions in 2017 of Abbott Laboratories' medical optics business and Swiss drugmaker Actelion standing out as recent deals.

There's an old saying that the tiger that doesn't prowl is a potential rug. Johnson & Johnson keeps prowling after being in business for more than 130 years.

10 stocks we like better than Johnson & Johnson
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Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors; LinkedIn is owned by Microsoft. Keith Speights has no position in any stocks mentioned. Matt DiLallo owns shares of AMZN, Brookfield Property Partners, and Johnson & Johnson. Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends AMZN and Johnson & Johnson. The Motley Fool has a disclosure policy.