The Best Consumer Stocks For Retirees


The Best Consumer Stocks For Retirees

Consumer-Driven Growth

Mixed Results Among Retail Stocks


The Best Consumer Stocks For Retirees

Consumers drove the majority of U.S. economic growth in the latest quarter, the Commerce Department announced Thursday. Consumer spending makes up two-thirds of U.S. economic activity, so a slight uptick in shopping trips can make a big difference to GDP.

Economists say low gas prices are a major contributor, as Americans spending less to fill up their cars find themselves with more cash to throw around elsewhere. They’re also fueling an uptick in travel. Travel stocks did well this month, with Royal Caribbean Cruises (RCL) rising 14%, Priceline (PCLN) gaining 8% and Expedia (EXPE) notching an 11% gain for the month after a late surge on earnings.

In addition to spending less on gas, more U.S. consumers are earning steady paychecks as the labor market continues to firm up. Wages are still only rising very slightly, but workers seem to be more confident in their job security. The savings rate dipped down in the second quarter, suggesting that Americans feel less pressure to save for a rainy day.

Some of that money is being diverted to discretionary purchases instead, although the spending isn’t spread evenly across companies.

Mixed Results Among Retail Stocks

Results among retail stocks were mixed in July: Costco (COST) had a solid month, rising 8%, and TJX Companies (TJX) notched a 6% gain. But Wal-Mart (WMT) and most of the dollar stores (DG, FDO, DLTR) saw smaller gains, and clothing stores Gap (GPS), Urban Outfitters (URBN) and Men’s Wearhouse (MW) all declined for the month. Designer names Coach (COH), Kate Spade (KATE) and Michael Kors (KORS) were also all lower on the month.

Amazon (AMZN) was the real winner in July, surging 24% after posting a surprise profit. Sales of electronics and general merchandise rose 31%, although earnings in the company’s web services segment (which mostly serves businesses) grew even faster.

Still, it’s clear the American consumer is in a spending mood, and investors should make sure they’re positioned to take advantage of it.

For Retirees

For retirees, I recommend you choose consumer sector stocks with well-established brands, reliable earnings, and a history of paying regular dividends.

They might not be as exciting as Amazon, but these companies can add a reliable income stream to your portfolio while also providing upside.

For example, in the Cabot Dividend Investor portfolio, we currently have a 40% total return in Church & Dwight (CHD), the company that owns the Arm & Hammer, OxiClean and Trojan brands, as well as some smaller, faster-growing brands. But even after a 35% climb in 18 months, Church & Dwight still looks strong and poised for further gains. Analysts are predicting 8% revenue growth this year and 9% growth next year.

And even when consumers start pocketing their dollars again, CHD will continue rewarding investors with regular dividends—the company has increased its dividend by 11% per year on average since 2009. I currently have CHD rated Buy in the Dividend Investor portfolio for investors who want both stock price appreciation and dividend growth.

Your guide to a secure retirement,

Chloe Lutts Jensen,
Chief Analyst, Cabot Dividend Investor

Stock Picks


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This stock is somewhat well known, but far from well loved.

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