When you save for retirement, investing becomes a different ball game. The day-to-day movements in the market don't matter that much as you focus on long-term profit. As a buy-and-hold investor, you don't trade often and don't aim for quick profits.
When choosing a company, make sure that it has long-term growth potential as you believe that solid and stable companies generally increase in value over time and generate a steady income that is not limited to inflation. exceeds, but also contributes to your nest. egg.
But that's not an easy task in the post COVID-19 environment. Many top companies have cut or suspended their dividends this year to survive in one of the worst economic downturns we have seen in our lives. Boeing (NYSE :), Royal Dutch Shell (NYSE 🙂 and Walt Disney Company (NYSE 🙂 are among them.
While corporate payouts are likely to decline this year, there are still some market segments that will go against the trend. We've shortlisted three dividend stocks if you're looking to invest for your golden years. Each is considered a safe choice due to their ample cash reserves, healthy balance sheets and reasonable payout ratios.
1. Cisco Systems
Cisco (NASDAQ 🙂 is not a high-flying technology player that could double in value in a few months, but it is a cash-rich company well positioned to operate continuously. to pay dividends. The San Jose-based network giant is the world's largest manufacturer of routers, switches and other equipment that companies use to connect computers.
While the cyclical nature of this segment of the hardware market could continue to put pressure on the performance of Cisco & # 39; s stock in the near term, we think now is the time to buy this name and get higher returns .
Cisco 1-Year Chart.
After a disappointing last month, many analysts cited Cisco's dividend and valuation as factors that would limit many additional downside risks. Another reason we are fairly optimistic about Cisco's ability to pay dividends: the company's aggressive diversification is moving away from hardware to a software-driven model in new, fast-growing areas of the market, such as cybersecurity, applications and services. .
Under Chief Executive Officer Chuck Robbins, Cisco has made a series of acquisitions to build a software and services company. Last year, it agreed to acquire Acacia Communications (NASDAQ 🙂 for approximately $ 2.6 billion, obtaining chips and machines that help convert optical signals into electronic data.
These growth initiatives, coupled with the company's dominant position in America, where it generates most of its revenue, has positioned the company to outperform when macroeconomic risks recede.
In addition to growth, Cisco is also a reliable dividend payer. Although Cisco is not yet considered an aristocrat, since it only pays dividends for 11 years, Cisco has nevertheless increased its payout every year, making it an attractive option for those looking for growing income.
With a current annual return of about 3.68%, investors get a quarterly payout of $ 0.36 per share, which is up 14.2% per year for the past five years. In addition, the payout ratio on Cisco's dividend is 53%, which means that there is much more room for dividend increases in the future. The stock closed at $ 39.06 after Tuesday's trading
2. General Mills
Consumer goods are classic defenses because they are less tied to the economic cycle. That's why we love General Mills (NYSE :), the maker of well-known household brands like Cheerios, Yoplait yogurt, and Nature Valley granola bars.
Trading at $ 59.86 by Tuesday's close, the stock is up 11% this year and is unlikely to show much volatility even if the market slumps again. Another benefit of owning GIS stock is that investors receive a dividend yielding a very decent 3.41%. That is a nice return that is also reliable. General Mills has paid dividends continuously for 120 years.
General Mills 1-Year Chart.
In recent years, General Mills has sought to diversify it to stimulate additional growth. The company bought Blue Buffalo Pet Products in 2018, the largest deal in 18 years.
The acquisition added a new industry to the company's portfolio, at a time when the traditional nutritional unit was under pressure from consumers rapidly changing their eating habits in search of fresher, greener and less sugary foods.
General Mills stock is likely to underperform in a bull market. However, it is a defensive name that will fare better during bear markets.
3. Merck & Company
Health care stocks are considered to be producers of solid incomes. Like retailers, utility companies and garbage collectors, healthcare providers offer services that remain necessary even in a recession. Moreover, economic fluctuations do not usually hinder the introduction of new medicines and devices.
Stocks such as Merck (NYSE 🙂 are well positioned not only to beat the market during a recession, but also to deliver good sustainable returns. The company is currently benefiting from the success of its best-selling cancer drug Keytruda. Analysts expect Keytruda's annual sales to reach $ 20 billion by 2023, according to FactSet, generating more than a third of the total by then. Merck's revenues from Keytruda were up 29% in the second quarter.
Merck is also one of the leading drug companies developing vaccines and therapies to combat COVID-19. The company began testing one of its experimental vaccine candidates in healthy volunteers this month.
With a growing dividend and share buybacks, we believe the company is a good long-term bet for those looking for increasing payouts. The stock, which closed at $ 81.90 yesterday, is currently returning 3% via the quarterly dividend of $ 0.61 per share. The drug company increased its payout by 11% last year.
