Published: Tuesday, 5 Jul 2011 | 11:14 AM ET
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Text SizeBy: Mark McLaughlin,
Special to CNBC.com
Special to CNBC.com
As the baby-boomers starts to retire, making their investment nest eggs last will be a priority.
Rising life expectancies coupled with escalating health-care costs will force the baby boom generation to rethink the conventional retirement wisdom of cashing in stocks for bonds.
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Bryce Duffy | Stone | Getty Images |
David Williams — who will be retiring at the end of 2012 after 37 years as a mutual fund manager, including the last 18 years at the helm of $6.4 billion Columbia Value & Restructuring [EVRAX 52.13 
-0.14 (-0.27%) 
]— cautions fellow boomers not to get too conservative.
-0.14 (-0.27%) ]— cautions fellow boomers not to get too conservative.Instead, he recommends buying and holding blue-chip stocks that not only throw off income but can also deliver steady share price growth.
"We believe that higher quality companies will provide better risk-adjusted returns over full market cycles," adds Jason Lilly, co-manager of the Bright Rock Quality Large Cap Fund [BQLCX 11.84 -0.04 (-0.34%) ] and a financial advisor catering to the generation entering their golden years.
-0.04 (-0.34%) ] and a financial advisor catering to the generation entering their golden years.High-quality stocks that can produce both growth and income play an important part in enabling boomers to maintain a comfortable lifestyle through what's likely to be a long retirement.
Stocks with staying power possess similar qualities — market leadership, shareholder-friendly management, strong balance sheets, consistent profitability and healthy cash flow.
With that in mind, here are 14 stocks to consider as core holdings for the future:
Dividend Payers
This play on the mobile Internet pays a handsome dividend of 5.4 percent. If the Apple iPhone expands its dominant position in the smartphone market, Verizon will be able to play up its network advantages over other carriers.
Doug Kreps, manager of the Fort Pitt Capital Total Return Fund [FPCGX 14.92 -0.04 (-0.27%) ], is also excited about the prospects for its FIOS multi-media service, which should increase bundled sales of phone, Internet and cable, and its FlexView video on demand service.
-0.04 (-0.27%) ], is also excited about the prospects for its FIOS multi-media service, which should increase bundled sales of phone, Internet and cable, and its FlexView video on demand service.No bank survived the financial crisis better than JP Morgan. By picking up Bear Stearns and Washington Mutual on the cheap, the bank gained market share in both investment banking and retail banking.
Wall Street pros cite CEO Jamie Dimon’s astute management and the firm’s financial strength as reasons to hold the stock for the long haul. The stock currently yields 2.4 percent, and Mitchell Goldberg of Clientfirst Strategy in Woodbury, N.Y., expects JPM to grow its dividend the fastest among the biggest U.S. banks.
Pharmaceutical stocks should be a core holding of any investor looking for growth and income. While a handful of drug makers could have made our list, Switzerland’s Novartis stands out for its solid lineup of blockbusters (Lucentis for vision problems, cancer drugs Glivec and Tasigna, and newly approved Gilenya for multiple sclerosis) and what analysts consider one of the industry’s most promising pipelines. Standard & Poor’s recently raised its price target on the stock, which yields 3.3 percent, to $72.
A global aircraft duopoly with Airbus leaves Boeing well positioned to benefit from robust growth of passenger traffic in emerging markets like China and India. The aircraft maker estimates China alone will purchase 4,330 new planes over the next 20 years.
While the company is struggling with repeated delays on its 787 Dreamliner jet, Fort Pitt’s Kreps points out that it maintains a healthy backlog of orders for its mainstay 737 and expanded 747 models and is increasing production rates. Boeing’s defense business should get a lift from a $35 billion tanker contract with the Air Force won in early 2011. The company has grown its dividend 40 percent over the last four years and the stock currently yields 2.3 percent.
In a tough environment for most health-care stocks, Abbott is one of the few large caps expected to grow sales and earnings over the next several years, according to Bright Rock’s Lilly. The developer of drugs including autoimmune therapy Humira and medical devices like drug-coated stents enjoys strong patent protection and has a history of savvy acquisitions. Its shares yield a healthy 3.7 percent, and the company’s strong cash position should allow it to grow dividends at close to 10 percent a year. A presence in India and other fast growing international markets will also help.
A decline in defense spending should actually benefit Raytheon, which makes weapons such as the Tomahawk guided missiles that support the military’s goal of lower cost, remote combat. Shares have pulled back recently with the defense sector and are trading at a below market P/E of 10.
The company generates plenty of free cash flow, which it has been using to buy back stock and raise its dividend — the payout is up 11 percent annually over the last five years, and shares currently yield 3.5 percent, according to Jim Wright, CIO of Harvest Financial Partners in Paoli, Pa. A diversified product line and steady international demand should keep earnings growth steady over the next several years, Wright says.
Steady Growers
Commodities can be an effective hedge against inflation, which is already a threat in the developing world and could become one here should monetary policy remain stimulative. As the world’s largest copper producer and a play on the price of gold, Freeport McMoran can provide that hedge plus an attractive upside. Williams, who likes to buy beaten-up stocks and hold them to fair value, says the miner’s takeout value is double its current share price.
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