Who knows what to expect for investors this year. If 2020 proved anything, it is that forecasting for the next 12 months is an extremely risky endeavor.
At the start of 2020, no one could even tell us that the world economy would plunge into its worst recession since the Great Depression, and then be followed by one of the fastest economic and market recoveries in history.
Smart investors should therefore focus on companies that have sustainable competitive advantages, companies that consistently generate strong cash flows. Play the long game.
And as you invest to build an income stream for your retirement, pursuing this strategy becomes even more important. Look for stocks that are reliable, safe and that sell basic products and services, such as retailers, banks, utilities, and insurance.
Buying these stocks may not make you a millionaire overnight, but they will continue to pay for your income during your golden years. Below, I've compiled a list of three stocks you should consider buying for your retirement portfolio.
1. Costco Wholesale
Major US retailers have proven themselves to be reliable income producers for retirees. The nature of their business – selling basic products that consumers need regardless of the economic situation – makes them a safe bet in markets prone to all kinds of risks.
Of this group, Costco Wholesale (NASDAQ 🙂 is one of our favorites.
Costco & # 39; s extensive retail network and subscription-based retail model provide the stability of its income that long-term investors desire.
With a substantial portion of its business focused on selling goods at low profit margins, the Warehouse Shopping Club has approximately 99 million members. In 2019, they paid the company $ 3.35 billion in membership fees alone. In total, the retailer generated more than $ 160 billion.
This financial strength allowed Costco to reward its shareholders with growing dividends. In November, the company announced a $ 4.4 billion special distribution. Per share, that works out to about $ 10 per share.
After rising about 150% in the past five years, Costco's stock is not cheap. It closed 1.52% lower at $ 370.02 yesterday. However, many analysts believe Costco will get stronger after the pandemic and bring even more benefits to savvy investors. Costco offers a quarterly payout of $ 0.70 per share, which is up 12.7% per year for the past five years.
2. Royal Bank of Canada
Canadian banks traded on the New York Stock Exchange provide another great source of income for retirees in North America. What makes them reliable revenue generators is Canada's regulatory fitness, less competition and their revenue diversification.
Canada's largest lenders have been very consistent in rewarding investors through steadily growing dividends, on which they spend about 40% -50% of their income.
In this group, we particularly like Royal Bank of Canada (NYSE 🙂 (TSX :), Canada & # 39; s largest lender. The lender currently offers an annual dividend yield of more than 4%, a very attractive rate compared to the average return paid by companies.
With a high dividend yield, RY has been fairly consistent in increasing its payout, making it a solid dividend growth stock. Over the past decade, the bank's annual payout per share has increased from $ 2.00 to $ 4.29, translating into a compound annual growth rate (CAGR) of 8%. With a dividend payout ratio of around 45%, the lender has much more room to grow it in the future.
With the pandemic still raging, cyclical stocks like banks will not bring huge profits for investors, but now is also a good time for long-term investors to lock in their higher returns. With a return of 4%, Royal Bank of Canada is certainly a top dividend stock to consider.
3. Broadcom Inc.
If you plan to combine growth with a steadily increasing dividend stream, you should target mature companies in the technology space. The semiconductor giant Broadcom (NASDAQ 🙂 stands out in this group for its attractive dividend yield of more than 3% and its growing payouts.
The dividend has skyrocketed over the past decade, from just under $ 0.10 a share in 2011 to $ 3.6 quarterly payments today. This impressive growth was supported by a smart acquisition strategy and an explosive demand for connected devices, such as smartphones.
Broadcom is a major provider of semiconductors that filter radio signals and provide Wi-Fi connections in smartphones, including the iPhone. It also dominates the market for switches, machines that route traffic between server computers in data centers.
With the increasing use of cloud computing and the introduction of 5G phones, Broadcom is well positioned to continue its growth trajectory and provide more and more income for its long-term investors.
