The past few years have made many people realize the importance of building a retirement portfolio. Having dealt with a pandemic, layoffs, and inflation, investors realize the importance of having a solid portfolio that sustains any market situation.
For most, retirement investing is about picking stocks that pay high dividends and can generate passive income. However, I like to pick stocks that not only generate steady income but also have the potential to sustain any market situation and offer capital growth over the years. Such companies have stable balance sheets, solid histories, and a commitment to returning capital to shareholders.
These undervalued retirement stocks are low-risk and offer stability for your retirement portfolio. Let’s take a look at the top retirement stocks to buy in August.
PepsiCo (PEP)
A personal favorite, PepsiCo (NASDAQ:PEP), doesn’t disappoint. Inflation has had a huge impact on our wallets over the past year and reduced consumer discretionary spending. However, the demand for healthy snacks and beverages remained strong.
In these types of environments, brands with pricing power win. PepsiCo showed its pricing power in the second quarter earnings. The company increased the prices of its products to offset the rising costs and still saw a double-digit rise in organic revenue and adjusted earnings per share. PepsiCo demonstrated resilience and the ability to grow in an inflationary environment.
The company also enjoys an edge in the market with its wide range of brands. It owns several snack brands that helped the company achieve GAAP 10% year-over-year net revenue growth in the second quarter. In an uncertain market, PepsiCo is a safe bet. PEP stock is trading at $181 today and is moving toward the 52-week high of $196.
The stock has a dividend yield of 2.79% and paid a quarterly dividend of $1.26, which is a 10% rise over the previous dividend. It has a dividend payout ratio of 65% which is much higher than the industry standards. PepsiCo also can increase the dividends in the coming years and as we see the revenue grow, we could see a higher dividend payout. It is one of the undervalued retirement stocks to buy now.
PepsiCo has raised its outlook for organic revenue growth to 10% for this year and expects the EPS to come in at $7.47 for the year.
Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) is one of the largest healthcare companies in the world. The company has a vast portfolio of products and a solid history. However, it has been dealing with several lawsuits and offered settlements. The lawsuits grab headlines, but investors don’t need to worry much. The company is financially strong and has an impressive balance sheet.
Johnson & Johnson has a diversified portfolio of products and is less volatile than the stock market. The demand for pharmaceuticals and medical devices is insulated from the short term ups and downs. The company is in a good position to continue generating revenue for years to come.
Johnson & Johnson also owns some blockbuster devices and medicines that continue to generate significant income year after year. JNJ stock is exchanging hands at $172 and is not cheap, but this stock is poised to continue rewarding investors for many years to come.
Johnson & Johnson split off the consumer health division into a separate company and I believe this will boost its revenue growth over the long run. Even with inflation, people will be looking for ways to improve their health and wellbeing which bodes well for JNJ.
The Dividend King has enjoyed consecutive dividend increases for 62 years and is a top pick for dividend investors. It enjoys a dividend yield of 2.75% and has recently paid a quarterly dividend of $1.19. The company has a dividend payout ratio of 44% which is much higher than the industry average.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is a tech leader that holds a position in every portfolio. The company has been steadily moving upwards and I strongly believe it will continue to do so. It is dominating the software business and is known for some of the top brands including Windows and Azure.
Several global companies depend on Microsoft for their daily operations and it is investing heavily into artificial intelligence. While the company has a comparatively low dividend yield at 0.85% and a quarterly dividend of $0.68, it has enough room to raise the dividend for many years.
Its AI expansion is moving at a strong pace and the company has reported impressive revenue numbers. The company reported earnings per share of $2.69 and revenue of $56.19 billion. One solid reason to invest in the company is its diversified portfolio of products and the ability to sustain any market condition.
MSFT stock is trading at $320 today and while the stock isn’t cheap, it does have the potential to hit $500 in the long term. This is a must-have sock in your retirement portfolio.
On the date of publication, Vandita Jadeja 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.