The best retirement stocks ideally have attractive dividends that can be sustained. This can lead to steady income and long-term value for retirees.
The best retirement stocks are those that have dividends that can be sustained by earnings over the long term. This means the company can afford to pay dividends out of income, and still have enough left over to cover its capital requirements.
Ben Graham, the original value investor, wrote that a public company should pay out a normal and consistent amount of its earnings. He argued that dividend payments should represent about two-thirds of earnings, with the rest left over for the business to reinvest. However, given today's high capex requirements, this ratio should probably be no more than 50% of earnings. This strategy will arguably allow for companies to have many years of dividend growth.
We kept Graham's argument in mind when seeking out the best stocks to buy for retirees. Firms that consistently increased their dividends create steady income and long-term value for investors.
We also targeted companies that have attractive dividend yields compared to the S&P 500's, which is currently around 1.7%. It also helps if a publicly traded firm returns value to shareholders through stock buybacks.
With that in mind, here are nine of the best retirement stocks to buy now. This list features companies that have 10 years or more of dividend growth and a 60% or less payout ratio. They also boast a dividend yield of at least 3% and have a history of buying back their own stock. What's more, these stocks are profitable, but currently cheap. This makes them good long-term retirement stocks.
Comments
Post a Comment