Ah, retirement. The golden years. This is the time to be catching up on your reading, playing with your grandkids, maybe seeing the world a bit -- but definitely not a time to be worrying about whether your stock portfolio will crash.
To help you accomplish the former things, and avoid the latter, we screen for stocks offering four attributes that should appeal to retirees -- and really, anyone looking to own a safe stock. We seek reasonably large, established companies, with a $2 billion market cap and up, with the following attributes:
- Recognizable brand names.
- A respectable dividend, at least 4%.
- They don't zig and zag with every wobble in the stock market, showing a beta of less than 1.0.
- They don't cost a lot -- at least 20% cheaper than the stock market's 26.5 P/E ratio.
Image source: Getty Images.
In the past screens, we've focused primarily on familiar, U.S.-based stocks. But this month, to help you add a bit of diversification to your retirement portfolio, we've screened also for a fifth attribute. Taking our screen on a bit of a globetrot, we're traveling abroad in search of "safe stocks" -- and here are three we've found:
Korea Electric Power Corporation
Home to brand-name powerhouses such as Samsung and Hyundai, South Korea has grown over the past half-century into one of the world's richest countries and has transformed its economy from one based on subsistence farming into a leader in high tech. But here's the thing about high-tech economies -- they need electricity to run on, and that's where Korea Electric Power Corporation (KEP -1.00%) comes in.
Generating 93% of South Korea's electric power, KEPCO is majority-owned by the government -- but the remainder of its stock is available for investment, and I think it's worth a look. Why? Let's start with the valuation. KEPCO stock sells for a mere 4 times trailing earnings. That's far cheaper than the average valuation on the S&P 500, and a cheap price even for the company's rather low projected earnings growth rate of 3% (according to data from S&P Global Market Intelligence.) On top of that, KEPCO pays its shareholders a 4.4% annual dividend that's more than twice the average 2.1% on the S&P.
Can KEPCO keep up the dividend and even add capital gains from a rising stock price? I think so. The large asset sale that temporarily boosted earnings at KEPCO in 2015 has now rolled off the books, but earnings remain strong, and the stock's P/E today is still remarkably low. With analysts forecasting continued earnings growth, my feeling is that, if you believe in the South Korean economic miracle, you have to believe that the future for Korea Electric Power Corporation -- the company providing power to 93% of that miracle -- is secure.
SK Telecom Co., Ltd.
Our second "safe international" candidate also hails from South Korea. While SK Telecom Co., Ltd. (SKM 0.05%) is hardly a household name here, in his new book The New Koreans, Korea specialist Michael Breen identifies the company as one part of South Korea's fourth largest chaebol industrial conglomerate. (There are 61 chaebol in all, with Samsung, Hyundai, and LG being the other three, and the best-known internationally). Collectively, these four conglomerates produce 10% of South Korea's GDP -- making them arguably "too big to fail."
You can see this stability reflected in SK's low beta of 0.6. Yet despite the stability of its stock, and its outsize role in the economy, SK sports a very reasonable valuation of just 10.4 times trailing earnings -- much cheaper than most S&P stocks, which average a P/E of 26.1. SK also pays a pretty nice dividend of 4.4%.
Breen describes South Korea as a country dominated by such corporate giants. While SK Telecom doesn't control KEPCO's outsize share of the market for telecommunications, it is the nation's largest provider of mobile communications. It's also likely to further entrench its position by virtue of the gargantuan wireless area network it's installed throughout the country, which will give 99% of the South Korean population access to Wi-Fi and enable a nationwide Internet of Things.
Given its leading market position, investments to strengthen that position further -- and of course, its high dividend, a respectable growth rate of 7.7%, and a low P/E, I think SK Telecom is also worth a look.
BCE Inc.
And now, finally shifting our focus away from South Korea, we circle nearly all the way back home to take a look at Canadian telco BCE Inc. (BCE -0.92%).
Canada's third largest provider of mobile telephony (second largest, postpaid), BCE is something like the AT&T of Canada -- but cheaper. Valued at 18.3 times earnings, BCE offers investors a combination of modest growth rates and a beefy 4.7% dividend yield. And in terms of volatility, BCE stock is exceptionally stable, showing less than a 0.4 beta that barely registers a shudder when the rest of the market drops (or jumps).
That could be good news for new investors, because BCE is expected to report earnings next week, on April 26. Analysts predict that the company will report revenue growth of about 2% but show about a 3% drop in earnings year over year. But given how imperturbable the stock has proved over the years, even a decline in earnings probably won't disturb investors overmuch -- so long as the decline isn't too much worse than is already expected.
After all, analysts quoted on S&P Global seem pretty certain BCE will keep on growing at a relatively steady 3% clip over the next five years. Plus, there are the fat dividend checks rolling in every quarter. Together, those two factors should make BCE a relatively stress-free stock to invest in if you're retired.
