Stocks to buy

3 Cash Cows to Buy for Passive Income in Retirement

We all dream of retiring with a steady income and financial security. Discovering passive income streams is one of the ideal outcomes for those heading into, or already in, retirement. 

Indeed, the flexibility self-created monthly or quarterly income provides is precious. Who knows how long social security benefits will remain funded? We’re now nearing a funding cliff for many major programs, and there appear to be calls to cut certain programs, eventually. Essentially, the system as it is right now is unsustainable. Many investors know this, and many are looking to great their own passive income for retirement.

Thus, for those seeking to do so in the stock market, this task can be daunting. Plenty of high-yield companies also offer relatively high risk. Conversely, a wide swath of growth stocks offer no yield at all.

Here are three dividend stocks I think provide defensiveness, value and stability, alongside meaningful and consistent income. These are all companies I’d stick with until retirement.

O Realty Income $61.85
MCD McDonald’s $282.23
KO Coca-Cola $62.41

Realty Income (O)

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First on this list of cash cows to buy for those seeking a passive income stream is Realty Income (NYSE:O).

Realty Income is a real estate investment trust (REIT) specializing in obtaining and overseeing individual freestanding commercial properties leased to clients for extended periods. The properties are leased to retail and industrial clients with a service, low-price, or non-discretionary focus. The corporation has real estate holdings in all 50 US states, Puerto Rico, Spain, Italy, and the UK.

Realty Income has gained immense popularity for its monthly dividends, a concept it championed, earning the monikerMonthly Dividend Companymany years ago. As a triple-net lease real estate investment trust, Realty Income benefits from tenants covering significant expenses like utilities and taxes, making these leases more attractive options for investors.

With that said, Realty Income makes a great passive income source for retirement investors because of its reliable and consistent dividends. Realty Income is navigating the current economic conditions as well.

The prospect of increased interest rates presents a potential challenge, as the company may have to pay more to cover its debt in the coming years. However, inflation can also work in Realty Income’s favor by boosting the value of its assets and allowing for more flexibility in raising rental prices.

McDonald’s (MCD)

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McDonald’s (NYSE:MCD) is a renowned fast-food brand offering diverse fundamentals.

It falls under the consumer discretionary industry, as customers can choose from other food chains.

McDonald’s is a reliable choice for investors as it consistently performs well in the market, making it a suitable investment during difficult economic times. Indeed, MCD stock is a stable and unexciting equity to purchase.

McDonald’s is a global leader in terms of quick service restaurant brands. Thus, if the expected economic downturn (or recession) takes place in 2023, those looking to dine out may choose toward a lower-priced option, such as McDonald’s.

If a recession doesn’t take place, those who frequent these establishments may increase their dining frequency, also boosting this company’s stock.

McDonald’s business model is ideal for those who believe the economy will improve, but are still determining the timing. The fast-food chain has a robust financial structure and can sustain steady demand during prosperous and challenging economic times, making it a practical and cautious option.

Ultimately, McDonald’s is the perfect “play-it-safe” choice, with its balance sheet rated as investment grade. While having a solid financial foundation is essential in a challenging economic climate, it is equally beneficial during prosperous times.

Coca-Cola (KO)

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Coca-Cola (NYSE:KO) is a solid investment for those seeking a reliable dividend stock.

Currently, KO stock offers a dividend yield of 3% and has expanded beyond beverages into healthy snacks. While it may not see significant growth in the short term, Coca-Cola is a trusted brand that will stabilize any portfolio.

According to the company’s most recent Q3 earnings report, Coca-Cola has shown that the company’s resilient strategy against economic downturns is still effective. Despite facing significant currency challenges and increased expenses, the famous beverage company achieved 10% growth in revenue, reaching $11.1 billion. These results also allowed the company to revise its full-year forecast upwards.

One appealing characteristic of KO stock to consider is its potential to thrive in times of doubt. If the general economic situation worsens, Coca-Cola has a few advantages. First, their flagship products have a captivating quality that keeps customers returning. Second, they can draw customers away from other providers of caffeinated drinks and gain a more significant market share.

It’s worth mentioning that KO stock is only one hold rating away from earning a complete strong buy recommendation from analysts. It’s no surprise that analysts are optimistic about the company’s future. Along with its revenue growth, Coca-Cola has impressive profit margins. For instance, its net margin is 23.44%, higher than more than 94% of its competitors.

In essence, KO stock is well-positioned to handle any changes in the economy. If the market experiences an upswing, Coca-Cola’s focus on millennials should yield significant profits. Conversely, if a recession arises, the company’s products compelling appeal should keep it afloat.

On the date of publication, Chris MacDonald has a position in KO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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