5 Top Stocks for Retirees to Buy

EPD Dividend Chart
EPD Dividend Chart

The company's share price has taken a bit of a hit since oil and gas prices have started to decline, but the company has churned out cash flow just as well as before the oil downturn. So, if investors are willing to look beyond the recent decline in share price and focus instead on the great income-generating possibilities right now, Enterprise is a stock that needs to be on your radar.

Brian Feroldi : At first glance, suggesting that a fast-growing restaurant company could be a good choice for a retiree might strike you as a bit odd, but Texas Roadhouse isn't just any old restaurant.

The company's metrics from last quarter are simply mouthwatering: Revenue was up 12%, net income jumped 24%, restaurant margins were up 112 basis points, and same-store sales grew 4.5% at company-owned stores. Amazingly, that was the 24th quarter in a row that comps increased, which is a testament to just how well-run this company is.

Image source: Texas Roadhouse.

The year ahead should be another good one as management has plans to open 30 new stores -- seven of which are in its new Bubba 33 restaurant concept -- a healthy increase over the 485 stores it operated at year end. If the company can continue to grow its comps by mid single digits, then revenue and profits should again grow by double-digits, and since management believes the U.S. alone could support at least 700 stores, there is still plenty of room to grow.

Beyond the growth, one reason retirees should warm up to Texas Roadhouse is that it offers growth and income. The company initiated a dividend in 2011 and has grown it every year since. Its current annual dividend of $0.68 gives its shares a yield of 1.7%, which is destined to grow quickly over time.

Texas Roadhouse is a rare company that offers investors fast growth and income. That's a combination any retiree should love.

Evan Niu, CFA : One of my favorite income-oriented positions (that I currently have a large position in) that would be a great fit for retirees is BlackRock Enhanced Capital and Income . It's an indexed ETF with a twist: It boosts the yield by using a strategy of selling call options on equity indexes. The fund primarily sells calls against the S&P 500 , but those premiums that it brings it substantially increase its distribution yield, which is currently sitting at an impressive 8.9%.

On top of that, CII distributes its payout on a monthly basis instead of a quarterly basis (currently $0.10 per share per month), that means if you have that generous yield set to reinvest, you'll enjoy the benefit of greater compounding.

To be clear, since CII writes call options that, by definition, limit upside in the event the market rallies, the fund is unlikely to outperform during bull markets. So CII is not a capital appreciation play; it's an income investment. For these reasons, you shouldn't expect CII to outperform, but what you can expect is a a hefty and reliable distribution yield.

Sean Williams: Retirees want the best of both worlds -- the ability to have their investment appreciate in value and deliver income, while at the same time not risking much of their capital in the process. Finding companies that fit the bill is easier said than done, but one that stands out time and again for me is U.S. pharmacy and pharmacy-benefits management giant CVS Health .

CVS Health holds what I believe are three major advantages for today's retirees.

Image source: CVS Health.

Even with the merger between competitors Walgreens Boots Alliance and Rite Aid , which is designed to give CVS a run for its money, CVS will retain close to 60% pharmacy/drugstore market share in the U.S., and it could gain even more if Walgreens Boots Alliance struggles to put Rite Aid's somewhat unpopular brand in the rearview mirror. Having dominant market share affords CVS the ability to play with its pricing and loyalty programs to lure in new customers and retain existing customers.

CVS Health is also a play on two major demographic shifts: the retirement of baby boomers and an increasing life expectancy. As Obamacare has lowered the rate of uninsured Americans, the presumption is that more people are getting preventative care. In turn, this should translate into more opportunities for CVS Health to capitalize by filling prescriptions and selling discretionary front-end healthcare products.

Lastly, buying CVS allows retirees to play a growing trend of generic drug usage. As branded-drug prices soar, physicians and consumers are opting for cheaper generics when available. However, for pharmacies, generic drugs can actually provide juicier margins. As generic prescription counts grow, volume growth should translate into healthy profit growth for CVS.

A solid long-term business model and a 1.6% yield is what retirees would get with CVS Health.

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The article 5 Top Stocks for Retirees to Buy originally appeared on

Brian Feroldi has no position in any stocks mentioned. Dan Caplinger has no position in any stocks mentioned. Evan Niu, CFA , owns shares of BlackRock Capital & Strategies Fn. Sean Williams has no position in any stocks mentioned. Tyler Crowe owns shares of Enterprise Products Partners. The Motley Fool recommends CVS Health, Enterprise Products Partners, and Texas Roadhouse. Try any of our Foolish newsletter services free for 30 days .We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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