If you're in your 50s, you might not currently need your investments to generate an income stream. However, once your household income from work sources stops or slows down, you could need some of your investments to generate income to help pay for living expenses. So you might consider investing now in the stocks of companies with proven business models that provide solid growth potential -- as many in their 50s can expect to live 20 or more years longer -- yet also pay at least a small dividend that has the potential to grow over time.
Continue Reading Below
Three diverse stocks that fit this bill are Cal-Maine Foods (NASDAQ: CALM), American Water Works Co. (NYSE: AWK), and Walt Disney Co. (NYSE: DIS).
Before we dig in, here's a general overview of these stocks.
Data source: Finviz.com and YCharts. Data to Sept.16.TTM = trailing 12 months.
Beta is a measure of stock-price volatility relative to the overall market, so American Water Works and Cal-Maine are just 19% and 70%, respectively, as volatile as the market, whereas Disney is 124% as volatile.
Cal-Maine appears to be an income juggernaut, with a 5.9% yield over the trailing 12 months. However, this yield can vary greatly, as will be discussed below.
The United States' shell egg titan
Image source: Getty Images.
Cal-Maine Foods is the largest producer of shell eggs in the United States. Its fast-growing specialty egg business -- which includes organic and cage-free eggs -- is its growth engine.Just about all the major corporate egg buyers in the country have recently pledged to buy only cage-free eggs by a certain date.Cal-Maine's size should enable it to scale up more quickly than its smaller rivals to meet the expected growth in demand.
The egg-producing giant had a superb fiscal 2016, with year-over-year revenue rising more than 21% and earnings per share soaring 96%. Investors shouldn't expect earnings to continue to nearly double annually going forward. The avian flu outbreak in the U.S. in the spring of 2015 caused unusual volatility in the price of shell eggs, which gave the company's financials a big boost.
Cal-Maine's stock is yielding 5.9% over the trailing 12 months. Due to the unpredictability of the price of shell eggs, the company pays a variable dividend. In each quarter that it reports a net income, it pays a dividend of one-third of the quarterly income. So it's not a stock for investors who need a predictable income stream, but could be a good choice for those in their 50s who are most concerned with total capital appreciation potential.
The United States' water utility giant
Image source: Getty Images.
American Water Works is the largest investor-owned water and wastewater utility in the U.S., providing services to about 15 million people in 47 states and Ontario, Canada. This is a company that provides the most essential product on the planet, with demand immune to changing tastes and largely immune to economic downturns.
A water utility stock that's yielding 2% might sound a bit stodgy to some folks in their 50s. However, American Water has increased its dividend every year since the company went public in 2008.Moreover, it offers solid growth potential. CEO Susan Story recently said the company is on track to increase earnings per share at a 7% to 10% compounded annual growth rate over the five-year period from 2016 through 2020.
The U.S. water system infrastructure is in poor shape. Many municipalities that own and operate their systems can't afford the necessary upgrades. This dynamic is providing a buying opportunity for American Water. Its market-based business also provides growth potential because the company can set its own rates.
The global diversified entertainment behemoth
Image source: Walt Disney.
Walt Disney is probably the most loved and diverse entertainment company in the world. Thanks to having three of its four business units firing on all cylinders, and one holding its own, it's having a spectacular fiscal 2016. For the first nine months of the year, the Mouse's revenue rose 9.1%, while GAAP earnings per share grew 17.2% and adjusted EPS jumped 16.7%.
Disney's iconic movie-production business began its powerful fiscal year with the release of the phenomenally successful Star Wars: The Force Awakens in December, followed in 2016 by blockbusters Zootopia, The Jungle Book,Captain America: Civil War, and Finding Dory. The company's parks and resorts business continues to post strong results, while the consumer products segment continues to tick solidly along.
Disney's other businesses are performing well enough to more than compensate for the low-single-digit revenue and earnings growth in its media networks segment. Moreover,the company is aggressively pursuing opportunities to counter the loss of cablesubscribers stemming largely fromthe availability of subscription video streaming services. Notably, last month it bought a 33% stake in streaming leader BAMTech for $1 billion. This stake will allow Disney to bring its content directly to consumers via over-the-top subscription streaming services.
With more Star Wars movies in the pipeline, the massive Shanghai Disney theme park now open, and a stake in a leading streaming company, Disney has plenty of catalysts for growth. Additionally, there's muchroom for growth in the dividend, currently yielding 1.5%.
A secret billion-dollar stock opportunity The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.
Beth McKenna has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. 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.