Retirement goals are highly personal. But a few broad themes, including stability, income, and growth, stand out as popular ones for investors who are preparing to transition -- or have recently made the move -- out of their working career.
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Below, Motley Fool investors highlight a few stocks that are well suited to achieving these targets. Read on to find out why Carnival (NYSE: CCL), Best Buy (NYSE: BBY), and Dominion Energy (NYSE: D) might make great additions to any baby boomer's portfolio.
Set a course for growth
Demitri Kalogeropoulos (Carnival): Your portfolio likely prioritizes dividends by including lots of blue-chip dividend stocks. But many investors will experience retirements that stretch on for decades. That ample time horizon leaves room for growth investments which -- while carrying greater risk -- have a better chance of outperforming inflation over time.
With Carnival Cruise Lines, investors get a good balance of income and growth without adding too much risk. The leading cruise ship operator, whose fleet of 100 vessels accounted for roughly half of the industry's trips last year, has a habit of outpacing management's expectations. Rising prices combined with healthy sales volumes to push revenue up 5.1% in the most recent quarter, compared to the 4% that CEO Arnold Donald and his executive team had predicted.
Carnival's strategy for accelerating that solid momentum includes continuously improving the sailing experience, including with recent additions like a digital streaming TV channel in staterooms. Its strong financial position is allowing for significant capital investments, meanwhile, with 18 new ships set to hit the water between 2018 and 2022. Optimism around these initiatives led management to approve Carnival's second double-digit dividend boost of 2017, and with these packaged vacations gaining in popularity, baby boomers should see many more such increases in the years and decades ahead.
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This stock could literally be your best buy now
Rich Smith (Best Buy): First, what are your goals as a baby boomer? If you're like most people in this generation, they probably include paying for a comfortable retirement. If you're like most investors, period, then you're probably looking for a stock offering some combination of good price, fast growth, and a decent dividend to help pay for that retirement.
Best Buy meets all three of these tests.
Value-wise, America's favorite brick-and-mortar electronics store sells for an attractive P/E ratio of less than 16 times trailing earnings -- that's about one-third cheaper than the average stock included in the S&P 500.
Wall Street analysts who chart Best Buy's prospects predict that over the next five years, Best Buy stock will increase its earnings at an annualized rate of approximately 14.4% -- that's 450 basis points faster than the average stock in the S&P 500.
Rounding out the trifecta, Best Buy pays its shareholders a 2.25% dividend yield annually. Versus the 1.9% average dividend yield on the S&P, that makes Best Buy a winner yet again.
"Best" of all, Best Buy needs to use only 33% of its annual profits to pay that dividend. With such a small payout ratio, there's little chance Best Buy stock will need to cut its dividend anytime soon -- and every chance its dividend will continue growing over time.
This stock promises strong earnings and dividend growth
Neha Chamaria (Dominion Energy): If you're at or near retirement, the stocks you choose to invest in should have two key qualities: stability in earnings and dividends. Most utility stocks are known to offer both, but one that you could consider today is Dominion Energy.
Just to give you a quick company background, Dominion is among the largest electricity and gas producers in the U.S., with an electricity-generation capacity of 25,700 megawatts. The company also operates one of the nation's largest natural-gas storage systems with a capacity of 1 trillion cubic feet.
Over the years, Dominion has grown its free cash flow at a steady pace, so much so that its annual dividend per share has nearly doubled in the past decade. Management's financial goals are equally encouraging, with targeted compounded earnings per share growth of 6% to 8% between 2017 and 2020 and "at least 5%" beyond 2020.
If that takes care of the stability in earnings that I referred to as an essential test in baby-boomer stocks, consider that Dominion is also aiming to grow its dividend annually by 10% through 2020. The stock is yielding a good 3.7% currently.
Dominion has a solid pipeline of projects backing its goals, including a massive liquefaction facility that will serve as a natural-gas export point to the Asia-Pacific region, and a gas-fired power plant in Greensville County that's touted to be among the world's largest natural-gas generating stations.
With such robust growth plans and commitment to shareholders, Dominion Energy looks like the kind of stock that should help you reach your retirement goals.
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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. Neha Chamaria has no position in any of the stocks mentioned. Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Carnival and Dominion Resources. The Motley Fool has a disclosure policy.