Which stocks are an ideal investment if you want to keep them for a long period of time and earn a stable income during your golden years?
If you are a buy-and-hold investor, large-cap high-yield dividend stocks are the best choice. These companies typically have strong business models that allow them to generate regular income for shareholders.
In addition to receiving income when you need it most, large-capitalization income-producing stocks are also less volatile during economic downturns, such as those we face today during the pandemic.
Their strong balance sheets, essential products and services and large global footprint help generate strong cash flows and provide investors with significant returns on an annual basis. Below we have identified three such stocks:
1. IBM
While new technology stocks have seen strong growth since the COVID-19 crisis, the old economy is or value-oriented technology stocks are also a good choice for earning stable dividends.
Many of these companies have legacy businesses that provide significant free cash flow to support dividends and investments in faster-growing areas such as cloud computing. International Business Machines (NYSE 🙂 is such a stock that should attract investors because of its attractive 5.2% dividend yield and stable payout
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The coronavirus pandemic has hurt IBM's. Its major clients are delaying the purchase of new mainframes and software, but the stock is still a safe bet for income investors with a long-term horizon.
The current economic downturn is not having a major impact on the company's recurring revenue stream, which consists mainly of financial services, telecom and the public sector. These areas of the economy have remained largely immune to the impact of lockdowns and closings, and will help IBM weather the downturn.
When it comes to growth, IBM has certainly disappointed investors over the past decade. But after last year's acquisition of Red Hat, a US-based multinational software company, and with new management, we see IBM return to growth once the pandemic is over.
IBM & # 39; s healthy balance sheet, manageable debt and recurring cash flows make the dividend a relatively safe bet for income-oriented investors. The stock, which closed at $ 124.44 yesterday, is paying $ 1.63 per share each quarter.
2. General Mills
Consumer goods offer another attractive opportunity for buy-and-hold investors. They are considered safe because these companies are less tied to the economic cycle and tend to sell products that consumers need regardless of economic conditions. For these reasons, we love General Mills (NYSE :), the maker of Cheerios cereals, Yoplait yogurt, and Nature Valley granola.
With a price of $ 64.28 at yesterday's close, the stock is up about 35% since its March low and is unlikely to show much volatility even if the market plunges again. Another benefit of owning GIS stock is that investors receive a 3.1% return, which is a good return to get through this downturn, especially from a company that has been paying dividends continuously for 120 years.
To spur in recent years, General Mills has sought to diversify its income base. In 2018, the company acquired the maker of Blue Buffalo pet food, the largest deal in 18 years.
The deal added a new growth opportunity to the company's portfolio at a time when the traditional nutritional unit was under pressure as consumers are rapidly changing their eating habits and looking for fresher, greener, less sugary foods.
GIS is a stock that is likely to underperform in a bull market, but it is a defensive name that will outperform in a bear market.
3. Brookfield Renewable Partners
Traditional utilities have limited dividend growth potential due to tighter regulatory controls and high dividend payout ratios. That said, there are selected higher growth utilities that generate unique assets or income, particularly in unregulated businesses.
Examples include wind or solar utility utilities, as well as utilities operating liquid export facilities. According to Morgan Stanley, the wind and solar energy economy will continue to improve over time, steadily growing investors looking for income. They currently supply more than half of all new energy generation capacity.
Among clean energy producers, we like Brookfield Renewable Partners (NYSE 🙂 in Bermuda for its dominant position in the field and diversified asset base. Brookfield & # 39; s diversity – it operates hydroelectric, wind, solar and biomass facilities in addition to its other renewable energy – and depth – with 17,400 MW of capacity and 876 facilities in North America, South America , Europe and Asia – give the company a wide range of services.
The partnership pays a quarterly dividend of $ 0.435 per unit, which is growing at a compound annual growth rate (CAGR) of approximately 6%.
Going forward, BEP expects its operational resources, or FFO, per unit to continue to increase through 2024 at a CAGR of more than 10% as it acquires more businesses and adds more capacity to its clean energy. According to its latest, Brookfield Renewable is aiming for sustainable distribution with increases averaging 5-9% per year.
The BEP stock traded at the close of $ 43.81 yesterday and has proven to be a great bet for investors over the past five years. But we still love this utility for its over 4% yield and its potential for future growth.
