Just because you're retired doesn't mean you have to settle for a fully defensive position for your portfolio. After all, many retirements can stretch happily on for decades. And that sort of time frame creates room for growth-focused equities in addition to the traditional, income-heavy investments.
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Below, Motley Fool investors put the spotlight on a few attractive stocks, Sherwin Williams (NYSE: SHW), Thermo Fisher Scientific (NYSE: TMO), and Welltower (NYSE: HCN), that they think offer that rare balance between growth and income that can keep your nest egg growing deep into your retirement years.
More exciting than watching paint dry
Demitri Kalogeropoulos (Sherwin Williams): Sales are booming at Sherwin Williams, and not just due to its recent merger with one-time rival Valspar. Sure, that new segment is contributing tons of growth these days, and it's the single biggest reason revenue spiked 37% in the third quarter. Yet its core business is firing on all cylinders, too. Sherwin Williams' organic sales were up 6% in the premium coatings segment and rose 6.5% at its retailing locations.
Those numbers don't reflect the company's true expansion pace, either, since disruption from hurricanes reduced reported sales and profits last quarter. CEO John Morikis and his team said they're expecting faster growth in the fiscal fourth quarter as core sales rise in the mid to high single digits.
Sherwin Williams' dividend yield has dropped to below 1% thanks to the over 50% spike in shares last year. Retirees could easily find a higher payout than that, even from a diversified index fund that just tracks the broader market.
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But there aren't too many companies that can combine an impressive track record for dividend growth -- the paint giant hasn't missed an annual payout raise in 39 years -- with the potential for market-thumping revenue as the Valspar acquisition adds close to $3 billion to its top line. With that integration proceeding as planned, and as Sherwin Williams reduces its debt burden, it should quickly return to its prior practice of sending at least 30% of earnings back to investors in dividends.
Supplying the biotech revolution
Maxx Chatsko (Thermo Fisher Scientific): Retirees looking to grow their nest eggs want mature, stable, and relatively safe stocks to invest in. Thermo Fisher Scientific, an $81 billion company that owns a virtual monopoly on the life sciences R&D supply chain, certainly fits the bill.
While the stock has risen 262% in the last decade, there's plenty of room to run. A steady stream of acquisitions has built a formidable portfolio of product offerings for biotech labs across the world, from chemical reagents to analytical equipment to software services. It can print genes for scientists at universities and supplies critical equipment needed to manufacture the world's first approved CAR-T therapies. It would be difficult to find a biotech cookie jar Thermo Fisher Scientific doesn't have its hands in.
Judging from its performance through the first nine months of 2017, the company was on pace to post record annual revenue totals. It had $3.7 billion in cash on hand at the end of September (another record) and could post its second straight year with annual operating cash flow over $3 billion. That has scary implications for future growth -- even for an $81 billion company.
Thermo Fisher Scientific is well-positioned to significantly increase its customer base through continued acquisitions, internal investments, and perhaps even value-creating spin-offs just as the power of biology becomes more accessible to even bootstrapped labs, not just large corporations. Simply put, this is a growth stock that could anchor your portfolio without much, if any, babysitting.
This healthcare investment could help you retire rich
Neha Chamaria (Welltower): If a stock is fundamentally strong and can offer steady and growing dividends backed by rising earnings and cash flows, retirees can expect their nest egg to grow at a strong clip. Welltower, a healthcare real estate investment trust (REIT) is a fine example that I believe retirees should pay attention to.
One sector that could make a killing from an aging population -- the U.S. Census Bureau estimates the 85-plus age group population to double in 20 years -- is healthcare. As a REIT, Welltower's business model of investing in healthcare properties, including senior housing, and operating them in partnership with healthcare providers holds a lot of promise. Because most of Welltower's tenants derive revenue from private sources and not the government, Welltower's income isn't subject to the whims of government-run healthcare programs. That aside, Welltower is also a diversified healthcare play that deals in senior housing, hospitals, post-acute care, and outpatient medical solutions.
Its business model and diversification has helped Welltower grow its funds from operations and dividends at a rapid pace. As my fellow Fool Matthew Frankel points out, Welltower is staring at some huge growth opportunities ahead, not just in 2018, but beyond. Combine that with a tidy dividend yield of 5.7%, and Welltower could even help you retire a millionaire.
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Demitrios Kalogeropoulos owns shares of Sherwin-Williams. Maxx Chatsko has no position in any of the stocks mentioned. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool recommends Sherwin-Williams and Welltower. The Motley Fool has a disclosure policy.