If you're in retirement or getting close to it, you can't take the same kinds of investing risks you could when you were younger. Investing when you're in your 60s means you can't afford to make mistakes since you don't have as much time to correct them, but it doesn't mean you're resigned to investing only in Treasury bills and bonds, either.
Looking for stocks of mature, well-established companies, rather than taking fliers on some untested upstart, is the rule of the day, maybe with a component of income added in. Below we look at Caterpillar (NYSE: CAT), Iron Mountain (NYSE: IRM), Lockheed Martin (NYSE: LMT) for investors in their 60s who haven't given upon growth to go along with their reliable streams of dividend payments.
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Heavy-equipment manufacturer Caterpillar has been the victim of protectionist policies that have gained momentum both in the U.S. and abroad recently. Fears of an escalating trade war sunk Caterpillar's stock 13% so far this year, denting the big gains it and other industrial giants have enjoyed over the past few years (Cat's stock is up 85% over the last three years).
Although considered a cyclical stock, which could be argued is at the tail end of a long bullish ride, some analysts think the mining sector is only just beginning to recover now, which portends further earnings growth for Caterpillar for a number of years to come. Its most recent earnings report would back up that view.
Caterpillar easily beat analyst expectations on the top and bottom lines, and it said most of its markets were improving, with healthy new orders and backlog. Analysts forecast 25% annual earnings growth for the next five years, and with the heavy equipment maker paying a dividend that currently yields 2.6%, when the down cycle eventually does hit, investors can still sit back and collect a nice check while waiting for the next turn to come.
Document and data-storage specialist Iron Mountain has achieved a track record of growth and profitability over the past few years that it ought to be able to build upon going forward. Some 95% of Fortune 1000 companies entrust their data to Iron Mountain, which also enjoys high customer retention rates and generates dependable cash flows.
That combination of factors means it will continue generating sufficient financial resources to fund its dividend, which currently yields 6.5% annually. Because it is structured as a real-estate investment trust, it has to pay investors almost all of its profits as dividends. Even so, it has doubled its payout over the past five years, and management has a goal of increasing the payout by some 4% annually, which it should be able to readily attain going forward.
The country's biggest defense contractor, Lockheed Martin, generates virtually all of its revenues from government expenditures, so it could be subject to political whims that would cut military spending. But it's in the middle of an upswing right now, and its most recent quarterly results showed revenues rising 6%, which generated a near-25% increase in profits. With almost across-the-board gains in each of its divisions, including aeronautics, its biggest, Lockheed Martin should be able to maintain its growth trajectory.
Shares of the defense contractor, which are virtually unchanged from where they started 2018, go for just 19 times trailing earnings and six times next year's estimates, while trading at only a fraction of its earnings growth rate. Analysts forecast Lockheed Martin to expand earnings at a 47% clip every year for the next five years. Its generous $8 per share dividend currently yields 2.5%.
With analysts also forecasting defense budget spending to accelerate over the next couple of years, Lockheed Martin investors have more than a fighting chance to see significant capital appreciation along with substantial revenue streams.
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