Every individual, to some degree, is faced with a mortal countdown clock toward retirement, running in their subconscious minds. Coming to terms with the inevitability of one’s old age is never an easy realization. However, it is those that have planned far in advance for this phase of life, that end up most comfortable when faced with reality.
It should be the goal of every individual to ensure their future financial position in a post-retirement context is sufficient for the lifestyle they aim to ensure. This would ideally consist of a robust net worth, which holds the inherent capability of generating a sustainable and passive income stream. Of course, arriving at such an outcome in the future would entail making the right investment decisions in the present. The smart investor ensures a periodic contribution towards such a retirement fund through current earnings.
In this article, we hope to shed some light on what we believe are ideal retirement assets to consider investing in. We present to you the top 5 retirement stocks that one can steadily add to their portfolio. These would allow you to enhance your retirement investment.
We begin our list with the iconic capital management firm, Morgan Stanley (MS). The company, in many ways symbolizes stability in the global financial markets, given its substantial scale, and historical capability of overcoming short-term market disruptions. It is a bank that is close to 90 years old and has withstood some of the most testing times of the century.
When considering a portfolio of retirement stocks to support you well past your retirement, there should be no compromise on stability amidst market volatilities. Morgan Stanley excels in this very metric, as is evident by how it has historically fared through periods of stress. In the last three years, which saw the global economy undergo pandemic and war-related shocks, the S&P 500 gained a mere 60%, whereas MS has more than doubled its price with an impressive 110% climb. For this reason, we believe that there is a strong indication that the stock holds the ability to absorb shocks. It also stands capable to deliver stable returns to its shareholders.
Similarly, in relation to Morgan Stanley’s dividend payout, the company has been consistently increasing its payments to shareholders since 2013. What was a mere 16 cent per share payment back then presently stands at nearly $3 payments as of 2022 with an almost 3.3% yield. Cashing in on this opportunity now could result in monumental returns by the time the typical investor today approaches the age of retirement.
International Business Machines Corporation
The second stock on our list of retirement stocks is tech giant, International Business Machines Corporation (IBM).
Typically, market participants prefer tech stocks such as Microsoft, Google, or Apple, to add to their portfolios. However, we here at Stocks Telegraph, are confident that IBM is far more suitable for investors; especially those looking to ensure a stable and sizeable passive income stream post-retirement.
For one, each of the big-name tech stocks mentioned above has a dividend yield of less than 1%, with the exception of Google, which does not pay a dividend at all. IBM, on the other hand, holds a dividend yield of almost 5%.
The company has been steadily increasing its dividend payment since 1994, a trend that its management states it is committed to sticking with. 2021 brought a generous bump in dividend payments for IBM shareholders, which had come about after IBM had spun off 80% of its negative growth segment that was focused on IT hardware. As a result, the company now enjoys free cash flow savings of almost $7 billion, through which it can continue to return value to its shareholders.
For these reasons, when looking for a retirement stock, IBM is pretty much a no-brainer and should be at the forefront of your portfolio. This is perhaps why the company’s shareholding includes 41 different hedge funds.
Up next, we present Digital Realty (DLR), which is a tech-oriented REIT, and has a portfolio consisting of nearly 300 data centers that span up to 26 different countries. The REIT is not only at the forefront of the global data-driven digital transformation but also is associated with some of the world’s largest tech giants. Each of these are reliant upon the firm’s digital infrastructure network. DLR’s tenants include Amazon Web Services, Google Cloud, Verizon, Adobe, and LinkedIn.
Such a stellar profile is a brilliant indicator of stability and points toward the company’s corporate longevity. When looking at the DLR from a retirement standpoint, such a feature holds heavy weight. It indicates that the stock is capable of maintaining income stability in the long term. Furthermore, many foresee a digital future, with the rise of metaverse technologies, 5G, and artificial intelligence. In light of this, retirement stocks such as DLR, which is optimally positioned to lead the future digital space, is not an easy one to brush aside.
In March 2022, the Digital Realty board approved a 5% dividend payment increase to $1.22 per share. This was the 17th consecutive year of a dividend increase for the company since its IPO in 2004; this strongly indicates the strength of its business and the robustness of its balance sheet.
Periodically investing in DLR from now, is sure to result in substantial net worth by the time you would retire. Such a net worth would be ideal from a retirement standpoint, especially given the stable income it can generate.
The fourth stock we put forward is the renowned beverages and snacks king, PepsiCo Inc. (PEP), which has many features that make it a strong retirement stock.
For one, the company is a mega-sized entity and has a market capitalization of over $200 billion. Its global scale of operations, which spans over 200 countries, employs by up to 309,000 individuals. A business of such colossal proportions embodies the idea of a firm being “too big to fail”. This is especially true, given how its various brands are so deeply ingrained in the consumer psyche. These billion-dollar brands include Pepsi-Cola, Lays, Doritos, Cheetos, Mountain Dew, and many others. This is precisely the sort of company anyone would want to invest in, to secure their future.
Secondly, we look at PepsiCo’s dividend program. Its yield of 2.76% is certainly not the highest on this list but is still fairly substantial. What is most impressive about the stock, however, is its DRIP feature. This refers to the dividend reinvestment program offered to its shareholders.
As a result of the DRIP aspect to the PEP stock, investors can enter into a set-it-and-forget-it position. As a result, dividend payments would be passively leading to portfolio growth over time. This makes it ideal for someone seeking a robust retirement financial position. If one were to periodically contribute savings to such a stock, this growth could potentially rise to exponential levels.
These features collectively make PepsiCo, simply too good to ignore in anyone’s retirement investment portfolio.
The last stock on our list of retirement stocks, but certainly not the least, is Broadcom Inc. (AVGO). Broadcom is one of the leading players in the semiconductor industry and has a market capitalization of over $200 billion.
In the last 10 years, AVGO has grown from $31 to nearly $600. Its incredible potential for the next 10 years is positioned to be just as impressive, as analysts continue to classify it as a stellar growth stock. Zacks ranks Broadcom as having both a Growth Style Score and a VGM Score of A. The industry as a whole is set to grow to become a trillion-dollar industry by 2030, in what has been dubbed the ‘the semiconductor decade’.
Broadcom, in particular, has been consistently beating its earnings estimates for the last 5 years, without fail. Analysts project the company’s earnings per share to climb by almost 50% in just the next two years. This points to how the growth engine, that is Broadcom, is far from slowing down. It is evident that the stock has plenty of juice to keep it going for many years to come.
This growth factor, coupled with the AVGO’s impressive annual dividend yield of 2.84% makes the stock a great investment choice for those looking for safe retirement stocks. Cashing in on this opportunity now could result in a stellar portfolio a couple of decades down the line.
Planning for one’s retirement may seem like a challenging endeavor, with many complex variables to factor into the decisions made. However, it is extremely crucial to plan for the future, without compromise. This would ensure one to support an adequate lifestyle solely through a passive income stream. The list presented above includes stocks that stand ideal from such a perspective. Each of these with their various strengths would be optimal stock to include within one’s retirement portfolio.