In this article, we discuss 10 low-risk stocks for retirement.
Average American households are behindhand when it comes to retirement planning. According to a survey conducted by McKinsey & Company in April, more than 80% of the baby boomers are unprepared for retirement and do not have access to any retirement plan. The survey further highlighted that nearly 47% of the households have not achieved financial freedom, 20% of them rely on Social Security, and 27% are financially at risk and do not have any stable financial means to sustain their spending pattern.
After the pandemic of 2020, recent economic worries have altered consumer sentiment who don’t find themselves in a retirement zone. About 59% of the respondents of a survey by Edward Jones said that they would delay their plans for retirement and would work either full-time or part-time. This was also supported by an analysis of the US Labor Department, which shows that over 1.5 million retirees have joined the US labor market over the past year due to rising cost concerns.
Considering the situation, analysts believe that people nearing the retirement age should take some strategic and deliberate steps to come up with a solid plan. One such way is to invest in stocks that offer long-term growth despite periods of market uncertainty. As major stocks and bonds have faltered this year, investors are turning their attention to stocks that generate passive income. These investments can provide a comfortable retirement when coupled with pension and Social Security payments. Some of those names include The Coca-Cola Company (NYSE:KO), PepsiCo, Inc. (NASDAQ:PEP), and Johnson & Johnson (NYSE:JNJ) among others that are discussed below.
Our Methodology:
The stocks mentioned below have strong financial fundamentals and have endured fluctuating market conditions better than their peers. In addition to this, these stocks also hold solid dividend histories. We also used Insider Monkey’s database of 912 hedge funds while choosing these stocks. The stocks in this article are popular among these funds as of the end of the first quarter of 2022.
Low-Risk Retirement Portfolio: Top 10 Stocks
10. Washington Trust Bancorp, Inc. (NASDAQ:WASH)
Number of Hedge Fund Holders: 6
Washington Trust Bancorp, Inc. (NASDAQ:WASH) is an American bank holding company that provides services in personal banking, commercial banking, and wealth management.
In Q2 2022, Washington Trust Bancorp, Inc. reported an operating cash flow of over $13 million and generated nearly $11.4 million in free cash flow. The company paid $9.4 million in dividends during the quarter, confirming its stable cash flow. Its net interest income also jumped by 7% to $37.5 million from the preceding quarter.
On June 16, Washington Trust Bancorp, Inc. declared a quarterly dividend of $0.54 per share, consistent with its previous dividend. The company has been raising its dividend consistently for the past 11 years. As of August 9, the stock’s dividend yield came in at 4.04%.
At the end of Q1 2022, 6 hedge funds in Insider Monkey’s database owned stakes in Washington Trust Bancorp, Inc., up from 4 a quarter earlier. The collective value of stakes owned by these hedge funds stood at over $18 million. Among these hedge funds, Third Avenue Management owned the largest stake in the company in Q1.
In addition to famous dividend stocks like The Coca-Cola Company, PepsiCo, Inc., and Johnson & Johnson, Washington Trust Bancorp, Inc. is also one of the most prominent dividend stocks to consider for a retirement portfolio.
9. Atmos Energy Corporation (NYSE:ATO)
Number of Hedge Fund Holders: 16
Atmos Energy Corporation (NYSE:ATO) is a Texas-based natural gas distribution company that serves over three million customers in the state.
In fiscal Q3 2022, Atmos Energy Corporation posted a GAAP EPS of $0.92, which beat analysts’ estimates by $0.07. The company’s revenue for the quarter also surpassed consensus by $128.6 million at $816.4 million, which also showed a 34.8% year-over-year growth. Over the last year, the company has beaten EPS estimates 100% of the time.
Atmos Energy Corporation has been making dividend payments consistently for 155 quarters and raised its payouts for 38 years in a row. It currently pays a quarterly dividend of $0.68 per share, with a dividend yield of 2.36%, as of the close of August 9.
Appreciating the company’s solid earnings growth, Wells Fargo lifted its price target on Atmos Energy Corporation in June to $130 with an Overweight rating on the shares.
At the end of Q1 2022, 16 hedge funds in Insider Monkey’s database owned stakes in Atmos Energy Corporation, down from 20 in the previous quarter. These stakes are collectively valued at over $636 million, compared with $557.4 million worth of stakes owned by hedge funds in the preceding quarter.
Aristotle Capital Management mentioned Atmos Energy Corporation in its Q1 2022 investor letter. Here is what the firm has to say:
“Headquartered in Dallas, Atmos Energy is the largest fully regulated natural gas-only utility in the U.S. It serves over three million distribution customers across eight states, primarily in the South. Approximately 70% of its revenue comes from Texas, where it owns one of the largest natural gas pipeline systems in the state. (Click here to view the full text)
8. Pinnacle West Capital Corporation (NYSE:PNW)
Number of Hedge Fund Holders: 19
Pinnacle West Capital Corporation (NYSE:PNW) is an investor-owned electric utility company that provides innovative energy solutions to its customers.
In Q2 2022, Pinnacle West Capital Corporation reported an operating cash flow of $247.6 million, up from $110.3 million during the same period last year. The company’s revenue for the quarter stood at over $6 billion, showing a 6% year-over-year growth. In FY22, the company expects retail customer growth to fall between 1.5% to 2.5%.
Pinnacle West Capital Corporation pays a quarterly dividend of $0.85 per share and has a yield of 4.46% recorded on August 9. The company has raised its dividends consistently for the past 9 years with a 5-year dividend CAGR of 5.3%.
Following the company’s Q2 2022 results, Mizuho lifted its price target on Pinnacle West Capital Corporation to $77 in August and maintained a Neutral rating on the shares.
AQR Capital Management owned a $28.6 million worth of stake in Pinnacle West Capital Corporation, becoming the company’s largest stakeholder in Q1 2022. Overall, 19 hedge funds tracked by Insider Monkey were bullish on the company in Q1, up from 18 in the previous quarter. These stakes are collectively valued at nearly $140 million.
7. Flowers Foods, Inc. (NYSE:FLO)
Number of Hedge Fund Holders: 25
Flowers Foods, Inc. (NYSE:FLO) is a Georgia-based bakery company that produces and markets packed bakery foods. In the past year, the stock gained 21.14% while its 5-year return came in at 56.9%, as of the market close of August 9.
Flowers Foods, Inc. ended Q1 2022 with $205.1 million available in cash and cash equivalents, up from $185.8 million in the previous quarter. The company’s operating cash flow came in at $124 million and its free cash flow stood at $73.6 million. Its dividend payments for the quarter amounted to $46.7 million, representing strong free cash flow generation.
On May 26, Flowers Foods, Inc. declared a quarterly dividend of $0.22 per share, up 4.8% from its previous dividend. This was the company’s 20th consecutive year of dividend raises as it has paid uninterrupted dividends for 79 quarters. As of August 9, the stock’s dividend yield stood at 3.18%.
The number of hedge funds tracked by Insider Monkey owning stakes in Flowers Foods, Inc. stood at 25 in Q1 2022, growing from 20 in the previous quarter. The collective value of these stakes is roughly $318 million, up from $277 million worth of stakes owned by hedge funds in the preceding quarter.
6. Old Republic International Corporation (NYSE:ORI)
Number of Hedge Fund Holders: 28
Old Republic International Corporation (NYSE:ORI) specializes in the business of insurance underwriting and also provides insurance-related services to consumers. The company pays a quarterly dividend of $0.23 per share, with a dividend yield of 4.08%, as of the close of August 9. It has been paying consistent dividends to shareholders for the past 81 years while maintaining a 41-year track record of consistent dividend growth.
In its recently published Q2 2022 results, Old Republic International Corporation posted an EPS of $0.69 per share, beating analysts’ consensus by $0.09. The company’s revenue of $2.13 billion also exceeded estimates by $120 million. It generated over $278 million in free cash flow during the quarter, up from $219 million during the same period last year.
As per Insider Monkey’s Q1 2022 database, 28 hedge funds owned stakes in Old Republic International Corporation, valued at over $314.6 million. In the previous quarter, 27 hedge funds owned investments in the company, holding a total value of $397.4 million. Jim Simons’ Renaissance Technologies was one of the company’s most prominent shareholders in Q1.
Old Republic International Corporation is also favored by investors due to its strong dividend growth history which is at par with famous dividend stocks like The Coca-Cola Company, PepsiCo, Inc., and Johnson & Johnson.
5. The Southern Company (NYSE:SO)
Number of Hedge Fund Holders: 28
The Southern Company (NYSE:SO) is a Georgia-based electric power distribution company. In Q2 2022, the company reported revenue of $7.21 billion, up 38.7% from the same period last year. Its operating cash flow stood at nearly $2 billion, up from $1.6 billion in the previous quarter. Moreover, it generated $193 million in free cash flow, compared with $173 million in the preceding quarter.
Since the start of 2022, The Southern Company delivered a 14.7% return to shareholders while its 12-month returns came in at 20%, as of the close of August 9. On July 18, the company declared a quarterly dividend of $0.68 per share, raising it by 3% in April. This was the company’s 21st consecutive year of dividend growth. The stock’s dividend yield came in at 3.48% on August 9.
Highlighting the company’s growth profile, UBS upgraded The Southern Company to Buy in August and also lifted the stock’s price target to $87.
At the end of Q1 2022, 28 hedge funds owned stakes in The Southern Company, up from 26 in the previous quarter, according to Insider Monkey’s data. These stakes hold a consolidated value of over $409.5 million. Jim Simons and Ken Griffin were some of the company’s leading stakeholders in Q1.
4. UGI Corporation (NYSE:UGI)
Number of Hedge Fund Holders: 30
An American natural gas distribution company, UGI Corporation (NYSE:UGI) reported revenue of $2.03 billion in fiscal Q3 2022, which showed a 35.3% year-over-year growth. The company’s operating cash flow for the quarter stood at $448 million while its free cash flow came in at $252 million.
UGI Corporation holds a strong dividend history, offering dividends on its common stock for the past 138 years consecutively. Moreover, the company has also been raising its dividends consistently for the past 35 years. It offers a quarterly dividend of $0.36 per share, with a dividend yield of 3.61%, as of August 9.
According to Insider Monkey’s Q1 2022 database, 30 hedge funds held investments in UGI Corporation, down from 31 in the previous quarter. These investments hold a collective value of $241.7 million, compared with $167.2 million worth of stakes owned by hedge funds in Q4 2021.
Diamond Hill Capital mentioned UGI Corporation in its Q1 2022 investor letter. Here is what the firm has to say:
“Taking a cue from the energy crisis in Europe, investors are questioning whether UGI Corporation, a natural gas and electric power utility, may mismanage commodity risk or face some demand destruction. We believe these risks are transient and manageable. What’s more, UGI has made significant investments in its renewable fuels business, including renewable natural gas (RNG) and bioLPG-propane produced from renewable sources such as plant and vegetable waste material.”
3. American Electric Power Company, Inc. (NASDAQ:AEP)
Number of Hedge Fund Holders: 33
American Electric Power Company, Inc. (NASDAQ:AEP) is an Ohio-based electric utility company that provides its services to over five million customers in 11 states. Since the beginning of the year, the stock gained 13.50% and its 12-month returns stood at 13.32%, as of the close of August 9.
American Electric Power Company, Inc. has been making dividend payments for every quarter since 1910 and maintained a 12-year track record of consistent dividend growth. The company pays a quarterly dividend of $0.78 per share, with a yield of 3.10%, as recorded on August 9.
In Q2 2022, American Electric Power Company, Inc. posted an EPS of $1.20, beating estimates by $0.01. The company generated revenue of $4.6 billion, up 21.1% from the same period last year. Its operating cash flow for the quarter came in at $1.36 billion.
As of the end of March 2022, 33 hedge funds tracked by Insider Monkey owned stakes in American Electric Power Company, Inc., compared with 34 in the previous quarter. These stakes hold a total value of roughly $430 million. With over 1.2 million shares, Millennium Management was the company’s largest stakeholder in Q1.
ClearBridge Investments mentioned American Electric Power Company, Inc. in its Q1 2022 investor letter. Here is what the firm has to say:
“About 5% of the portfolio is in transitioning power companies, typically migrating from coal to renewables. We have been active in encouraging these transitions and added a new position in American Electric Power (NASDAQ:AEP). AEP has the fastest planned renewable energy ramp in the U.S., with plans to both shrink coal and grow renewables by 50% each by 2030. This would drive an 80% emissions reduction, while supporting high single-digit earnings growth at a double-digit return.”
2. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 43
International Business Machines Corporation (NYSE:IBM) generated $810 million in free cash flow in Q2 2022 and its operating cash flow came in at $1.3 billion. The company has been paying dividends to shareholders since 1916 and has been raising its payouts consistently for the past 27 years. It pays a quarterly dividend of $1.65 per share, with a yield of 5.10%, as of August 9.
In July, Morgan Stanley raised its price target on International Business Machines Corporation to $157 with an Overweight rating on the shares, expecting the company to perform well in the second half of the year.
At the end of Q1 2022, 43 hedge funds in Insider Monkey’s database presented a bullish stance on International Business Machines Corporation. These hedge funds owned stakes worth over $1.16 billion in the company.
St. James Investment Company mentioned International Business Machines Corporation in its Q4 2021 investor letter. Here is what the firm had to say:
“IBM was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department of the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available.
One cannot overstate how powerful IBM was in the computer industry in the 1950s and 1960s. Every competitor rightly worried that if their product worked too well for too long, it was only a matter of time before an army of IBM salesforce representatives mobilized. In their easily recognizable uniforms of starched white shirts, red ties and blue suits, IBM marketers marched on their customers and offered a more expensive, but much more defensible, choice. “Nobody gets fired for buying IBM” was a common phrase. Even competitors acknowledged that the company excelled at sales. As a UNIVAC executive once complained, ‘It doesn’t do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen.’” (Click here to see the full text)
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 131
Apple Inc. (NASDAQ:AAPL) is one of the best companies for a retirement portfolio, as the stock has generated stable returns over the years, gaining 318.9% in the past five years. The technology company has also been a strong dividend payer, growing its dividends consistently for the past 9 years. It pays a quarterly dividend of $0.23 per share, with a dividend yield of 0.56%, as of August 9.
In fiscal Q3 2022, Apple Inc. posted a GAAP EPS of $1.20, which beat estimates by $0.05. The company’s product revenue stood at $63.3 billion and its accessories revenue came in at $8.08 billion. Overall, it generated revenue of $82.9 billion during the quarter, up 2% from the same period last year.
In July, Morgan Stanley raised its price target on Apple Inc. to $180 with an Overweight rating on the shares, as the company reported better-than-expected Q2 results.
At the end of Q1 2022, 131 hedge funds in Insider Monkey’s database owned stakes in Apple Inc., down from 134 a quarter earlier. The total value of these stakes is over $182 billion.
Wedgewood Partners mentioned Apple Inc. in its recently-published Q2 2022 investor letter. Here is what the firm has to say:
“Apple grew revenues +9%, driven by +17% growth in the Services segment. While iPhone revenues grew a modest +5%, it was on an exceptional year ago comparison of +66%. iPhone continues to capture most industry smartphone profits by focusing on high-end price tiers. Apple is taking nearly two-thirds of the revenue share in the premium ($400 and above) smartphone segment. Further, most of the growth was driven by expansion in the “ultra-premium” price tier of $1000 or more per unit.[1] As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially integrated circuits) and software continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.
You can also take a look at 10 Best High-Yield Dividend Champions to Buy in August and 10 High Free Cash Flow Dividend Stocks
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This article is originally published at Insider Monkey.
