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3 Stocks to Help You Make Money in Retirement

Especially if you're looking forward to a long retirement, you'll still want to own some stocks after you've cashed your final paycheck. Unlike cash or many bonds these days, returns from stocks have a strong chance of beating taxes and inflation over time to help you preserve your purchasing power throughout your retirement.

Still, as a retiree, you don't have the benefit of a work-based income stream to cover your costs of living or replace an investment that doesn't work out. As a result, you'll want to choose your stocks with an eye toward their proven track records of rewarding shareholders and potential to continue that trend. These three stocks can help you make money in retirement thanks to solid dividends, reasonable balance sheets, and decent valuations, offering you a great set of features for a retiree's portfolio.

Image source: Getty Images.

A driving force in the world's economy

Engine manufacturing titan Cummins (NYSE: CMI) claims its engines "power nearly every type of vehicle and equipment on Earth." In a world that depends on manufacturing, heavy equipment, and trade, making the engines that mechanize manufacturing and move all of that stuff around gives Cummins a strong opportunity to thrive.

From an investor's perspective, Cummins trades at less than 19 times its trailing earnings, a relative bargain compared to the nearly 25 times earnings of the S&P 500. With Cummins expected to deliver earnings growth around 12% annualized over the next five years, that multiple represents a reasonable value on an absolute basis as well as that relative one.

In addition, with a debt to-equity-ratio below 0.3 and over $1.4 billion in cash on its balance sheet, Cummins has a solid balance sheet enabling it to handle the cyclicality inherent in its business model. Retired investors looking to get paid for their investment will enjoy a yield of around 2.6% along with a dividend with a decent history of growth that remained stable throughout the financial crisis. 

With a name like this, it has to be good 

Comfort food giant JM Smucker (NYSE: SJM) is well known for its namesake jams and jellies, and with several lines of peanut butter to go with it, you can make one heck of a PB&J sandwich. Add more than a half dozen coffee brands and some very well-known pet food products, and JM Smucker could very well be a part of your daily life, even if you don't realize it makes all of those consumables.

At 23 times trailing earnings, JM Smucker looks like it trades at a slight discount to the overall market, but at less than 14 times expected future earnings, the value proposition gets more compelling. In addition, JM Smucker's balance sheet boasts a debt-to-equity ratio below 0.8 and a current ratio of almost exactly 1.0, providing a reasonable level of financial strength underpinning its business.

JM Smucker's dividend offers a nearly 2.9% yield, and with a 63% payout ratio, it has room to continue increasing its dividend over time as its business continues to grow. With earnings expected to grow around 7.4% on an annualized basis over the next five years, retirees have the opportunity to see those payments potentially outpace inflation. With a dividend growth history that traces back to 2002, JM Smucker appears to be willing to keep up that trend if its financials enable it to do so.

A Healthcare titan built to last

Image source: Getty Images.

With products that range from BAND-AIDs to leading-edge robotic surgeryJohnson & Johnson's (NYSE: JNJ) position in healthcare runs the gamut from everyday needs to life-saving devices. As the country's population continues to age, healthcare products and services will continue to be in demand, bolstering Johnson & Johnson's prospects for continued success.

Trading at nearly 23 times trailing earnings, Johnson & Johnson trades at a slight discount to the overall market, but its strong business model makes up for the lack of a super compelling bargain price. With earnings expected to grow at around 6.3% annualized over the next five years,   Johnson & Johnson isn't expected to light the world on fire, but investors can expect some potential dividend growth.

Speaking of that dividend, it has increased for over 50 years, placing Johnson & Johnson among an elite group of companies capable of rewarding its shareholders with rising payments for over half a century. With a payout ratio of around 55% of earnings, Johnson & Johnson looks capable of continuing that trend as long as its earnings truly do keep growing over time.

Additionally, with a balance sheet that sports over $12 billion in cash and a debt to equity ratio below 0.5, Johnson & Johnson has the financial fortitude to weather even downright nasty economic storms.

Stocks throughout your retirement

It makes sense to own some stocks throughout your retirement to help preserve your overall purchasing power as you're withdrawing cash to cover your costs of living. With their reasonable valuations, solid balance sheets, and shareholder-friendly dividend practices, these three stocks deserve consideration as part of the stock portion of your retirement portfolio. All investing involves risk, but the way these companies balance that risk with your potential rewards, they could very well play a strong role for you.

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Chuck Saletta owns shares of J.M. Smucker. The Motley Fool owns shares of and recommends Cummins and Johnson & Johnson. The Motley Fool has a disclosure policy.