3 Stocks That Should Be the Backbone of Your Retirement Portfolio

Stocks to buy

Perhaps the first word you’re looking for when investing in the best retirement stocks to buy is ‘resiliency’. Hence, you’re looking to load up on stocks that have weathered the storms of time, delivering sturdy returns. These companies typically offer indispensable products and services bolstered by strong brand equity and solid financial health.

Additionally, in hunting for retirement stocks, we’re also looking at companies characterized by their ability to consistently generate bottom-line growth, regardless of the economic situation. Moreover, another area you’re looking at is its track record of incrementally increasing dividend payments. With that said, here are three ideal stocks for a retirement portfolio built to last.

Retirement Stocks to Buy: Microsoft (MSFT)

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Microsoft (NASDAQ:MSFT) is a tech stock like none other. Its journey from a small software vendor to a global tech juggernaut is truly astounding. What sets it apart is its consistent evolution and involvement in dynamic, transformative tech trends over time. Few would’ve guessed its impressive trajectory from being a PC operating systems provider to becoming a needle-mover in cloud computing, AI, robotics, and more. Most recently, its partnership with OpenAI has positioned it as the key orchestrator of the generative AI revolution.

Furthermore, its financials are a peach, with revenue growth and net income margin averaging 14% and 34.4%, respectively, over the past five years. Consequently, it amassed a formidable cash war chest, with a levered free-cash-flow margin averaging 24% over the same period. Lately, we’ve seen its cloud computing arm in Azure outperforming other segments with a boost from AI infusion.

In terms of returns, MSFT has been a tremendous wealth compounder, with a 5-year total return of 228%, way ahead of the S&P 500’s 102% gain. These returns also factor in its quietly growing dividend, which may seem modest but has consistently grown for nearly two decades.

Amazon (AMZN)

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Amazon (NASDAQ:AMZN) is another growth story that never ceases to amaze. The company has evolved from a bookstore to a tech titan through its insatiable appetite for innovation. It has effectively rewritten the rules of online retail and cloud computing, dominating the two realms.

Naturally, it’s been an incredibly rewarding investment over the years, returning more than 1,141% to its investors in the past decade. In other words, had you invested $10,000 in AMZN stock in 2004, you would’ve compounded that investment to $124,100. 

Though it’s the most prolific name in e-commerce, Amazon is now equally renowned, if not more, for its cloud computing service. Amazon Web Services (AWS) has been a major growth engine for the company, with multiple analysts suggesting it could be a trillion-dollar entity. Moreover, with AI tailwinds propelling AWS, we expect this service to leave its competition in the digital dust.

Hence, AMZN is the most future-proof stock, with multiple catalysts motion. It continues to grow its top-and-bottom lines by double-digit margins.

Caterpillar (CAT)

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The construction industry is one of an economy’s core pillars and relies heavily on Caterpillar’s (NYSE:CAT) robust equipment and services. With nearly 100 years in the game, Caterpillar’s iconic yellow machinery has led to the development of countless projects globally. Moreover, it’s been one of the most resilient businesses over the years, surviving multiple crises while consistently delivering shareholder value. This enduring success underscores its powerful role in driving construction and economic growth.

Backed by stellar top-and-bottom-line growth, CAT stock has been a spectacular wealth compounder in recent years. In the past five years, the stock has delivered a handsome 226% total return for its investors, more than double the S&P 500’s return. Moreover, it boasts a superb dividend profile, with roughly 30 years of payout growth, while yielding 1.46%.  Also, in just the first-quarter (Q1), the firm allocated a whopping $5.1 billion toward share buybacks and dividend distributions.

On the date of publication, Muslim Farooque did not have (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.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.

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