In this article, we discuss the 10 best low-risk investment options to add to your retirement portfolio. You can skip our detailed analysis of the retirement phenomenon within the U.S., and go directly to read the Retirement Stock Portfolio: 5 Low Risk Investments.
In 2021, the economy faced persistent challenges due to the COVID-19 pandemic’s enduring impact. Despite recovery efforts, several significant hurdles created uncertainty regarding the revival. Inflation reached levels not seen in years, supply-chain disruptions hindered economic growth, and a limited labor pool presented ongoing difficulties for employers. This was further complicated by a record number of individuals either changing roles or leaving the workforce. Additionally, the emergence of the COVID-19 pandemic led to a growing interest in retirement among Americans.
Retirees globally are exploring avenues to boost their income through investments due to the highest inflation recorded in nearly four decades. Addressing this concern, the Social Security Administration alleviated the situation by announcing an 8.7% increase in benefits earlier this year to mitigate the impact of inflation, as cited by Bloomberg. With this adjustment, the average retiree benefit has reached $1,827 per month, marking a $146 increase from the previous year. However, given the average annual household expenses for individuals aged 65-74 amounting to approximately $53,000, these social security benefits fall short of covering living costs adequately.
Despite the data mentioned earlier, the United States possesses a thriving and robust retirement industry. McKinsey’s research indicates that the U.S. retirement market boasts a substantial $26 trillion in assets. This data also forecasts a remarkable shift: by 2030, retirees are expected to contribute more to global consumption than individuals in the working age range of 15 to 59 years in China. Within the retirement industry, the largest segment—Defined Contribution—accounts for approximately 30% of the total assets, totaling around $8 trillion, and generates an impressive $30 billion in revenue for managing firms. This segment oversees approximately 110 million accounts and has shown consistent growth over the past decade.
Lastly, an integral facet of retirement involves the assisted living community sector, commonly known as old age homes. These facilities offer seniors companionship and care during the later stages of their lives. As detailed in a research report by Grand View Market Research, the assisted living industry was valued at around $91.8 billion in 2022 and is anticipated to undergo a compound annual growth rate (CAGR) of 5.53% from 2023 to 2030. Within this market, the segment dedicated to individuals aged 85 and above held the largest market share in 2022. Looking towards 2040, the senior population in this age bracket is expected to more than double, rising from 6.4 million in 2016 to an estimated 14.6 million.
Shares of prominent companies such as The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), and Johnson & Johnson (NYSE:JNJ) are favored by retirees due to their consistent free cash flow and impressive histories of dividend growth. In the following sections, we’ll explore additional low-risk stock options suitable for retirement portfolios.
Photo by Max Harlynking on Unsplash
Our Methodology
For our list of the 10 best low-risk stocks for a retirement portfolio, we used a stock screener to come up with a list of stocks with a beta value of less than 1. We further narrowed down this list to include stocks that have a notable history of paying dividends to investors. Their dividend growth histories make them suitable options for retiree investors who seek to generate stable income. In addition to this, the hedge fund sentiment was measured using data from 910 hedge funds tracked by Insider Monkey in Q2 2023.
10. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 58
Dividend Yield as of 12/10: 2.79%
Beta Value: 0.45
Colgate-Palmolive Company (NYSE:CL) is a multinational corporation based in Midtown Manhattan, New York City, situated on Park Avenue. The corporation is primarily focused on manufacturing, distributing, and offering a range of household, healthcare, personal care, and veterinary products.
On September 14, the corporation declared a quarterly dividend of $0.48 per share, maintaining consistency with its prior dividend. In total, the company has increased its dividends for an impressive streak of 61 consecutive years. As of October 12, the stock’s dividend yield stood at 2.79%.
Insider Monkey database of the second quarter of 2023 showed that out of 910 hedge funds profiled, 58 had a stake in Colgate-Palmolive Company (NYSE:CL). The largest stockholder was First Eagle Investment Management which had 11.1 million shares of Colgate-Palmolive Company (NYSE:CL) with a combined value of $854.6 million.
Much like The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), and Johnson & Johnson (NYSE:JNJ), Colgate-Palmolive Company (NYSE:CL) is a favored stock among retirees.
9. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 61
Dividend Yield as of 12/10: 3.43%
Beta Value: 0.59
Established in 1892, The Coca-Cola Company (NYSE:KO) is a renowned multinational American corporation primarily recognized for its production of the iconic beverage, Coca-Cola. Beyond its flagship product, the company engages in the manufacture, distribution, and promotion of an extensive range of non-alcoholic beverage concentrates, syrups, and notably, alcoholic beverages within the beverage industry.
In the first half of FY23, the company generated $4.6 billion in operating cash flow, with free cash flow reaching $4 billion for the same period. This highlights The Coca-Cola Company (NYSE:KO)’s strong cash generation ability, positioning it favorably to meet its shareholder commitments in the upcoming periods. As of October 12, the company pays a quarterly dividend of $0.46 per share, resulting in a robust yield of 3.43%.
With a noteworthy track record of consistent dividend increases spanning six decades and a business model resilient to economic downturns, The Coca-Cola Company (NYSE:KO) has attracted increased attention from both individual and institutional investors. As of the conclusion of the second quarter, among the 910 funds tracked by Insider Monkey, 61 hedge funds held positions in the company. Particularly, the most notable investor was Warren Buffett, who maintained a substantial stake valued at $24 billion in The Coca-Cola Company (NYSE:KO).
8. CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 66
Dividend Yield as of 12/10: 3.37%
Beta Value: 0.56
CVS Health Corporation (NYSE:CVS) is a healthcare company based in the United States, operating an extensive network of retail pharmacies and clinics across the nation. The company is responsible for managing various brands, including CVS Pharmacy, CVS Caremark, MinuteClinic, and Omnicare.
Recently, CVS Health Corporation (NYSE:CVS) unveiled its Q2 results, showcasing an adjusted EPS of $2.21 for the quarter, surpassing expectations by $0.09. Furthermore, the revenue for the period witnessed a notable 10.3% increase compared to the previous year, reaching $88.92 billion and surpassing estimates by $2.39 billion. Presently, the company offers a dividend of $0.60, boasting a yield of 3.37% as of October 12.
At the conclusion of the second quarter in 2023, Insider Monkey’s database, which tracks 943 hedge funds, reported that 66 hedge funds held stakes in CVS Health Corporation (NYSE:CVS). The primary stakeholder was John Overdeck and David Siegel’s Two Sigma Advisors, possessing a significant stake in the company valued at $398.9 million.
Coho Partners Relative Value Equity Fund made the following comment about CVS Health Corporation (NYSE:CVS) in its second quarter 2023 investor letter:
“In December of 2017, CVS Health Corporation (NYSE:CVS) agreed to buy Aetna, which broadened its offering by entering the managed care business. CVS has been moving its portfolio to a more value-based outcome model, and Aetna was a major move in that direction. We were willing to accept the leverage that came with the deal because CVS has a very cash generative model, and we anticipated the free cash flow would enable the company to de-lever fairly quickly.
By mid-2022, CVS was in a position to use the free cash flow that had been going to debt repayment to do bolt-on deals to further prepare for the value-based outcome model and/or return more cash to shareholders in the form of higher dividends or share repurchases. However, CVS lost a “star” in its largest Medicare plan in late 2022 and this will adversely impact earnings in 2024. This was a surprise and disappointment to us, but management should be able to regain the “star” in the back half of 2023, which will then give the company a nice tailwind in 2025…” (Click here to read the full text)
7. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 67
Dividend Yield as of 12/10: 0.72%
Beta Value: 0.78
Costco Wholesale Corporation (NASDAQ:COST) operates an international chain of membership warehouses, mainly under the “Costco Wholesale” name, that carry quality, brand-name merchandise at substantially lower prices than are typically found at conventional wholesale or retail sources. The company provides a quarterly per-share dividend of $1.02, resulting in a dividend yield of 0.72% as of October 12. Costco Wholesale Corporation (NASDAQ:COST) has consistently increased its dividends for the past 19 years, demonstrating its commitment to rewarding shareholders.
According to Insider Monkey’s data, 67 hedge funds were long Costco Wholesale Corporation (NASDAQ:COST) at the end of Q2 2023, compared to 63 funds in the earlier quarter. Ray Dalio’s Bridgewater Associates is one of the most prominent stakeholders of the company, with 807,709 shares worth more than $434.8 million.
RiverPark Advisors mentioned Costco Wholesale Corporation (NASDAQ:COST) in its Q2 2023 investor letter. Here is what the firm has to say:
“Costco Wholesale Corporation (NASDAQ:COST), founded in 1983, is the world’s third-largest retailer with 850 stores, $240 billion in revenue and 68 million members spread across North America, Europe, Asia, and the Southern Pacific Region. The company is known for its strong value proposition driven by high-quality low-cost offerings including a well-regarded private-label brand. Costco regularly ranks at the top of customer surveys related to brand trust, product price and quality, and all-around experience. Historically, 90% of the company’s shoppers renew their memberships, which generate more than 50% of operating income.
Through expanding market share, new store openings, increasing member productivity, and omnichannel expansion, we believe the company can grow revenues annually in the high single digit percentage range. This revenue growth should yield steadily growing margins and EPS growth in the low-to-mid-teens, which should drive shareholder returns in the same range.”
6. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 68
Dividend Yield as of 12/10: 3.11%
Beta Value: 0.57
PepsiCo, Inc. (NASDAQ:PEP), based in the hamlet of Purchase within Harrison, New York, is a leading American multinational corporation in the food, snack, and beverage industry. Recognized for its financial stability the beverage giant has an ongoing streak of dividend growth spanning 51 years. Currently, it disburses a quarterly dividend of $1.265 per share, resulting in a dividend yield of 3.11% as of October 12.
According to Insider Monkey’s data, PepsiCo, Inc. (NASDAQ:PEP) was included in 68 hedge fund portfolios by the conclusion of Q2 2023. The primary shareholder was Fundsmith LLP, holding 6.6 million shares of the New York-based beverage manufacturer, valued at $1.2 billion. Over the past five years, the company’s shares have experienced a notable surge of approximately 51%.
Similar to The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), and Johnson & Johnson (NYSE:JNJ), PepsiCo, Inc. (NASDAQ:PEP) is a notable low-risk stock option.
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Disclosure: None. Retirement Stock Portfolio: 10 Low Risk Investments is originally published on Insider Monkey.
