Running out of money is a genuine fear for everyone, no matter their age or income. During our working years, this anxiety is quieted by a steady cash flow, allowing us to build a "just in case" fund for unexpected expenses and, hopefully, a retirement fund. Because when you get to retirement age, that steady paycheck stops and money anxiety creeps in again.
Many investors turn to the stock market for security in uncertain times. Owning the right mix of growth and dividend stocks is the key to never running out of money in retirement and ensuring your financial security should your income be slashed for whatever reason.
Stocks with a stable history, consistent dividends, and a genuine potential for price appreciation are perfect candidates. In other words, consistency trumps high dividends and returns when it comes to saving for retirement.
My research has discovered a portfolio of five stocks that are a good start for anyone seeking to cement their financial security.
A true diversified giant, this $355 billion behemoth boasts the world's fifth-largest pharmaceutical business, a vast array of consumer products, and a complete medical device business. The company's brand portfolio of household names alone creates tremendous long-term value for the investor. Add in the fact that JNJ plans to release ten new drugs by 2020 and the company becomes a no-brainer as a long-term holding.
Not content to rest on its success, JNJ spent $5 billion in 2016 on M&A and significant licensing deals, further securing prospects. An aggressive $10 billion share buyback program was completed this year, and I expect further buybacks to occur.
I love the fact that JNJ has been ramping up its emerging markets exposure with new R&D facilities in Brazil, China, and India. Emerging markets are the future, and JNJ is on top of this wave.
Yielding over 2.5% annually, JNJ is an official Dividend Aristocrat that has increased its dividend for 54 straight years! That's over twice the time required to achieve the vaunted Aristocrat status.
2. Raytheon (NYSE: RTN)
Raytheon is a large-cap defensive play that deserves a place in every long-term, cash-creating portfolio. While the company's shares yield a modest 2%, buybacks more than make up for the low yield. Raytheon boasts a long history of buyback increases, capped by a 9% increase in 2017.
The company is aggressively investing in the latest technology, has multiple new defense contracts, both domestic and foreign, and has increased booking and revenue guidance for the full year of 2017. Provided that global conflict is not going to decrease anytime soon, Raytheon is poised to continue its success streak.
3. Federated Realty Investment Trust (NYSE: FRT)
Every long-term, income-producing portfolio needs to have at least one real estate investment trust (REIT). The structure of a REIT legally requires its managers to pay out 90% of profits as dividends, meaning that investors can usually expect high yields.
However, most REITs are precluded from the Dividend Aristocrat list, as it's extraordinarily tricky to consistently raise dividends when most of the income is going back to shareholders each year.
Federal Realty Trust is an exception to the rule. It is so well managed that it has been able to annually increase dividends for over 50 years. The company boasts a highly-diversified client base with no more than 9% of the portfolio in any one industry. Plus, no single tenant accounts for over 3% of the portfolio. Together, these policies create a shield against sector and tenant slowdowns.
Funds from operations (FFO) ramped higher by 12% in 2016, and over the last five years, FFO grew by 7% annually on average. Protecting itself from short-term bearish cycles, Federal Realty uses long-term leases with built in yearly increases. This protects and assures continual improvement in the bottom line.
The REIT currently yields just 3%, but the high potential for dividend increases and appreciation make FRT an ideal addition to your portfolio.
4. Automated Data Processing (Nasdaq: ADP)
Another dividend aristocrat on the list, ADP is the leading global human resources management firm. The company has increased its dividend for 42 years in a row, earning it a stable position among the most reliable dividend payers.
Shares are higher by nearly 30% over the last 52 weeks and currently yield 2% annually.
The company's growth is truly impressive, with a 6% revenue increase in fiscal 2017 and earnings per share (EPS) growth of 13% over the same time frame. Guidance for fiscal 2018 reflects continued improvement. Revenue is expected to move higher by over 5%, with EPS forecasted to improve by 3%.
ADP is benefitting from the steadily improving economy and resulting new hires. And with the increasing regulatory environment, ADP looks like an ideal pick for growth well into the future.
5. ARK Industrial Innovation ETF (Nasdaq: ARKQ)
Every long-term stock portfolio should contain at least one exchange-traded fund (ETF) for broad exposure to a sector or market expected to trend higher over time.
I am partial to actively managed ETFs, as managers can capitalize on changing conditions while maintaining some diversification within the sector. In other words, experienced managers do the heavy lifting, while investors benefit from their expertise.
Right now, and for the foreseeable future, the tech sector is on fire. ARKQ is invested in the future's hottest trends, including robotics, 3D printing, autonomous vehicles, energy storage, and even a small exposure to space exploration.
While I tend to avoid ultra-high returning stocks, ARKQ is an exception, largely due to my long-term bullish views on the sector and my high opinion of the manager, Catherine Wood.
Shares are higher by nearly 50% this year, and I fully expect years of outperformance from this ETF.
Risks To Consider: There is no certainty in the financial markets. No matter your expertise, pedigree, or talent, the market has a funny way of humbling everyone. Always use stops and position size properly when investing in the stock market.
Action To Take: If you're looking for security and performance, consider adding one or more of the above five stocks to your long-term portfolio.
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