When building a retirement portfolio, we all want investments that can stand the test of time. The ideal stocks to hold the long-haul deliver stable returns while providing regular income via dividends. As our portfolios grow over the decades, these dividends can compound into an exponential source of passive income. Of course, we also need stocks sturdy enough to weather any storms the market may bring.
In my experience, the keys to identifying retirement portfolio anchors are finding companies with essential products and services, loyal customer bases, and strong balance sheets. Businesses like these are poised to keep generating profits across the ups and downs of economic cycles. As a bonus, look for stocks with a history of raising their dividend payments year after year. Here are seven such stocks I think fit most investors’ retirement portfolios right now.
PepsiCo (PEP)
As you build your retirement portfolio, PepsiCo (NASDAQ:PEP) should be one of the first stocks you look to as an essential anchor. This beverage and snacks giant has been a stalwart holding for many long-term investors, delivering stable returns plus a growing dividend stream. Even in turbulent market environments, PepsiCo continues marching higher over the long-run.
When you think of PepsiCo, of course, the first products that come to mind are Pepsi sodas and other iconic beverage brands like Gatorade and Aquafina. However, many investors fail to realize that the company owns an even more expansive snacks and packaged foods business. Walk down any grocery store aisle, and you’ll notice how many bagged chips, dips, crackers, and other tasty treats are manufactured by PepsiCo. It’s a dominant force in the consumer staples industry.
Despite its massive size and maturity, PepsiCo shows no signs of slowing down in terms of its growth. In the company’s latest quarterly report, revenue grew nearly 7% year-over-year while profits surged 14%. Management continues to impress by expanding through new product innovation and strategically entering developing global markets.
Another detail you’ll love about PepsiCo is its best-in-class 87% gross margin, demonstrating unmatched pricing power and efficiency advantages versus its peers. PepsiCo is also a Dividend King, with 52 consecutive years of payout hikes under its belt. The company’s current yield sits at a tasty 3%, providing investors with a reliable passive income stream.
Considering slower economic growth forecasts for 2024, many stocks could face headwinds. But PepsiCo boasts an extremely resilient business model that performs even better during downturns as consumers flock to snack and beverage indulgences. Thus, PEP stock appears poised to continue delivering market-beating returns for your portfolio, making it a cornerstone holding for those looking forward to retirement.
Caterpillar (CAT)
You should also look to industrial stocks like Caterpillar (NYSE:CAT) to hold as a core long-term portfolio anchor. Caterpillar supplies heavy construction machinery essential to infrastructure projects all over the globe. As governments and corporations ramp up spending to modernize aging structures and systems, demand for Caterpillar’s iconic yellow bulldozers, excavators, and loaders surges higher.
In recent years, the passage of numerous infrastructure bills has laid the foundation for sustained growth in companies like Caterpillar. While these multi-trillion dollar packages took some time to negotiate, funds are now steadily being dispersed and put to work fixing roads, bridges, ports, and more here in the U.S. Many contractors utilize Caterpillar equipment, so these ambitious public works plans translate to big business for the industry giant. Upgrades to things like the power grid and water pipelines also can’t be done without Caterpillar’s machinery by construction crews’ sides.
Sure enough, the company’s latest financial results showed stellar momentum, with sales up 12% year-over-year and earnings per share jumping 37%. Both metrics came in well above expectations. Caterpillar boasts leading profitability metrics for its sector, with net margins of more than 16.6%, compared to just 4.8% for its average peer. There’s good reason to be confident this stock still has room to run higher as infrastructure activity continues ramping up over the next decade. Notably, Caterpillar has also hiked its dividend for 29 straight years, recently yielding 1.7% with a moderate payout ratio.
For investors seeking industrial sector exposure plus income generation, CAT stock checks all the boxes as a long-term portfolio anchor. You’d do well to buy shares on any pullbacks, benefitting from the upcoming waves of infrastructure modernization both domestically and worldwide.
FTAI Aviation (FTAI)
FTAI Aviation (NASDAQ:FTAI) operates an essential yet behind-the-scenes business leasing commercial aircraft engines and components. It’s the quintessential “picks and shovels” play that still offers explosive growth potential in the years ahead. While buying airline stocks involves notable risks, FTAI provides diversified exposure to global air travel activity without the volatility seen in individual carriers.
Specializing mainly in leasing the ubiquitous CFM56 engine, FTAI owns the world’s largest independent pool of these engines deployed in passenger and cargo jets across 30 international airlines. Through purchasing engines and components when prices are depressed and then leasing them out at higher rates, FTAI enjoys strong profitability and cash flows. The company uses stable earnings to secure cheap financing for its long-term expansion at rates unattainable by regular airlines.
Over the last two years, FTAI has managed to quadruple revenue. Consequently, the stock price has soared over 260% since Sept. 2022. However, don’t let the big run fool you – there’s still plenty of upside ahead. Based on 2025 earnings projections, shares trade at only 17-times forward earnings once explosive bottom-line growth is accounted for. Capital continues pouring into new investments as management deploys cash into more engine assets.
With global travel demand forecasted to expand further beyond, FTAI Aviation finds itself in an airline industry “sweet spot” for lessors like itself. The company still only commands a small single-digit percentage of total engine value in the market. Plus, shareholders enjoy an escalating dividend currently yielding 2.2% annually. For these reasons, FTAI deserves a strong buy rating and warrants accumulation on any dips. This engine lessor gives your portfolio valuable aviation industry exposure without keeping you up at night worrying about bankruptcies.
McDonald’s (MCD)
When building a retirement portfolio to weather any storm, McDonald’s (NYSE:MCD) is a must-buy anchor to stabilize your holdings. This fast food leader has proven repeatedly that its business not only survives downturns but actually thrives as consumers flock to affordable indulgences. Throughout recessions, McDonald’s has shown the ability to continue growing both sales and profits.
Even during 2020’s unprecedented pandemic, which decimated the restaurant industry, McDonald’s surpassed its pre-COVID share price by September 2020 thanks to drive-thrus, deliveries, and digital investments. Today, with high inflation and interest rates squeezing lower-income households worldwide, McDonald’s sustains strong momentum, growing Q3 2023 revenue by 14% year-over-year, and earnings by an even more impressive 19%.
Beyond its impressive resilience, McDonald’s has aggressively repurchased shares, with over $1 billion spent last quarter alone. Its dividend has grown for 48 straight years, currently yielding 2.3% with room to increase further.
McDonald’s offers the essential brand power and financial strength to emerge stronger from any crisis for a retirement portfolio built to deliver through thick and thin. Indeed, MCD stock provides you with an oasis of stability (plus growth) in turbulent times.
Itochu (ITOCF)
Itochu (OTCMKTS:ITOCF) is a great stock to help diversify your core retirement holdings with global reach. This Japanese trading conglomerate deals in various products, from clothes to machines, metals, food, chemicals, and energy. Ranked among the largest and oldest companies worldwide, Itochu leverages its scale and connections to drive steady profits across sectors.
Its wide array of business lines provide resilience across economic cycles, while ventures in essential categories like food and energy ensure stable demand. Itochu has delivered reliable growth for long-term shareholders through sound strategy execution. While revenue and earnings growth appears to be modest at first glance, consistency is key for a lifetime investment.
Given its strong cash flows, Itochu rewards loyal investors with a secure 2.65% dividend yield. The stock isn’t exactly cheap today, but reasonable valuations for such a diversified business capable of navigating just about any environment the future holds. I’m confident Itochu’s diversity and dividends will help anchor overall portfolio returns over the decades to come.
Airbus (EADSY)
Many overlook aerospace stocks as retirement portfolio pillars, given industry volatility. However, I believe Airbus (OTCMKTS:EADSY) deserves consideration as a potential portfolio anchor. Commercial air travel demand shows no signs of disappearing. And with arch-rival Boeing (NYSE:BA) faltering recently amidst crashes and technical failures, Airbus looks primed to capture more global market share.
The company booked over $163 billion in new airplane orders last year, implying a packed production schedule for years ahead. Helped by Boeing ceding ground, analysts forecast Airbus will grow revenue by 12% in 2023 and sustain double-digit revenue growth through 2026. Earnings per share could more than double between 2023 and 2025 as operating leverage kicks in. Based on 2025 profit estimates, EADSY stock trades at a forward price-earnings ratio of around just 5-times. That’s an absolute steal for a high-flying firm dominating a critical global duopoly.
While airline manufacturers tend to be cyclical, Airbus appears positioned in the driver’s seat to capitalize on growing long-term air travel while taking share from a stumbling giant.
Aaon (AAON)
Sticking with essential-for-life products, Aaon (NASDAQ:AAON) manufactures specialized heating, ventilation, and air conditioning (HVAC) equipment for large facilities. With summers becoming hotter by the year, demand rises for high-grade cooling systems. AAON customizes premium HVAC products capable of large-scale climate control with energy efficiency advantages.
Business is booming, with Q3 sales up almost 29% year-over-year and profit growth topping 75% last quarter. Bolstered product margins led to an impressive earnings beat this past quarter as well. Thanks to a pristine balance sheet carrying little debt and substantial profitability, AAON is structurally set up to provide sustainable long-term growth.
Though only currently yielding 0.45%, this is a company with a dividend that’s still notable. Savvy investors can ride surging HVAC demand over decades as climate change necessitates advanced systems like these.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.