The 3 Best Stocks to Own in Retirement

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Record low interest rates are forcing millions of retirees to invest their nest egg in the stock market. Dividend stocks are enticing for those who want income, unfortunately, not all dividend-paying stocks are created equal. You have to be selective and even look beyond dividend payers to stocks whose share price will go up.

With that in mind, we asked three Motley Foolcontributorstoshare a stock they feel is a great choice for investors in their golden years.

A durable business model + strong returns = great retirement investment

Tyler Crowe:Adding income investments to your portfolio is one of the best ways to enjoy retirement and not have to eat into the principal you have built up over the years. You don't just want any old dividend stock, though. You want to invest in a company that has an extremely durable business model that has the pricing power and an eye for returns that ensure you will receive a steadily growing payment over time. One stock that fits this model extremely well is Waste Management (NYSE: WM).

There are immense competitive advantages in the waste handling and disposal business. First, owning and operating landfills comes under a lot of regulatory scrutiny, and it's not like anyone can open a new landfill wherever they want. On top of that, investing in a fleet of waste handling equipment is capital-intense. These elements, and the fact that it's a very mature market, means that Waste Management doesn't have to worry much about new competitors popping up and taking market share, and it also gives it pretty solid pricing power.

To add to those competitive advantages, Waste Management's management team has been very good at turning those advantages into a consistently profitable business with high rates of return and a steadily growing dividend and it buys back gobs of its own shares to boost per-share earnings. You can't ask for much more from an income investment.

WM Return on Equity (TTM) data by YCharts

Connecting you to a high yield

Brian Feroldi: A strong retirement stock should have the following attributes working in its favor: hold a dominant position in an important industry, be in growth mode, and pay out a strong dividend. One company that fits that description perfectly is Verizon (NYSE: VZ), which is why I think it's a great stock for retirees to buy and hold.

People have become addicted to their smartphones and many even consider them to be a basic necessity. With more than 112 million connected devices on its network, Verizon is the top dog in this important industry. Its network spans the country and the company has done a great job at convincing people that it offers the best service, which keeps them very loyal. That's evidenced by the company's industry-leading churn rate of only 0.96%.

Image source: GERALT via PIXABAY.

You might think that the U.S. wireless market is so mature that there isn't any room for Verizon to grow, but I think that's an incorrect assumption. After all, the "Internet of Things" is still in its very early innings, and as more and more devices come online, they are going to need access to a reliable and fast network. Combine that fact with the company's ability to slowly increase pricesand its continued rollout of Fios,and I'm confident Verizon should be able to post modest revenue growth for years to come.

Verizon has paid out a generous dividend for years, and I expect more of the same in the future. The stock yields just over 4% at current prices and its payout ratio is right around 50%, so there's still room left for growth.

A strong defense is your best offense

Jason Hall: One of the challenges of managing your portfolio when you're retired is striking the balance between minimizing the risk of capital loss and generating long-term returns and income. And while shares ofBerkshire Hathaway Inc (NYSE: BRK-B) won't generate income in the form of dividends, it's an ideal stock for capital preservation, with a nice opportunity for gains. In other words, it's an excellent "defensive" stock for retirees to own. (Berkshire A shares are trading for around $220,000 each, so they might be out of your price range, but B shares trade for around $145.)

To start, Warren Buffett's Berkshire Hathaway is a wonderful company, with a diverse collection of operating companies that generate steady (and huge) cash flows. Furthermore, those cash flows are by and large recession-resistant, particularly in the insurance and utility segments, and don't forget the dividends paid by the huge stock portfolio. In other words, Berkshire should be able to ride out the ups and downs of the market, helping to protect investors' capital in weak markets.

With a beta routinely below 1 -- meaning its stock price is less volatile than the market -- there's evidence to support Berkshire as a great defensive investment.

Bottom line: Even retirees need to think long-term about their portfolios, and Berkshire is an ideal long-term holding. It may not outperform a bull market, but -- and this is incredibly important when you're retired -- you'll likely have less risk of losing value if there's a protracted bear market. That's why Berkshire is one of the best stocks to own in retirement.

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Brian Feroldihas no position in any stocks mentioned. Jason Hall owns shares of Berkshire Hathaway (B shares) and Waste Management. Tyler Crowe owns shares of Berkshire Hathaway (B shares) and Waste Management. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Verizon Communications. The Motley Fool owns shares of Waste Management. 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