Seasoned investors concur equities are an important asset class in retirement portfolios. Therefore today’s article introduces four stocks with dividends that could help long-term investors prepare for retirement.
Michael Kitces of Buckingham Wealth Partners points out, “For prospective retirees … determining how best to invest a retirement portfolio to generate income is a substantial challenge.”
Academic studies and anecdotal evidence suggest that a large number of individuals are afraid of eroding their capital and outliving their assets in retirement. However, with a long-term approach to investing, most market participants should be able to save a significant amount of money for their golden years. And stocks with dividends could help in this process.
Research by Michael Clemens of BankInvest Group highlights, “Dividend investing has historically outperformed both the broader market and value investing, and at the same time shown lower risk. Dividend investing ‘overlap’ with both value investing and low-volatility investing, but is an independent investment style of its own.”
Diversified buy-and-hold portfolios are likely to finish the year with significant gains. Those who stayed in the markets in the spring were rewarded handsomely. As I write, many stocks currently look poised to carry positive momentum into 2021.
While growth, “new” economy and tech shares posted most of the headlines in the past several months, stocks with dividends contributed to portfolio returns. Although it is not possible to know what the new year may bring, I expect passive-income seekers to continue to favor robust dividend stocks.
Let’s now take a look at our four stocks with dividends that could help investors prepare for retirement:
- Coca-Cola (NYSE:KO)
- FlexShares Quality Dividend Index Fund (NYSEARCA:QDF)
- Store Capital (NYSE:STOR)
- Walgreens Boots Alliance (NASDAQ:WBA)
Stocks With Dividends: Coca-Cola (KO)
Atlanta, Georgia-headquartered Coca Cola needs little introduction. It owns several of the world’s top non-alcoholic soft drink brands, including Coca-Cola, Diet Coke, Fanta and Sprite.
Its beverages range from sparkling soft drinks to water, sports drinks, juice, dairy, plant-based beverages, tea, coffee and energy drinks.
Coca-Cola announced Q3 metrics in late October. Revenue and operating income fell 9% and 8%, respectively. Net revenue was $8.7 billion. Similarly, EPS declined 33% to 40 cents.
In recent quarters, the beverage giant initiated a number of restructuring initiatives, with the focus on growing the stronger brands, by cutting the number of brands almost in half..
CEO James Quincey commented, “Throughout this year’s crisis, our system has remained focused on its beverages for life strategy. We are accelerating our transformation that was already underway… While many challenges still lie ahead, our progress in the quarter gives me confidence we are on the right path”.
KO stock’s forward P/E and P/S ratios are $24.63 and $6.94. The dividend yield is 3.1%. We like the company as a dividend play and would look to buy into the declines.
FlexShares Quality Dividend Index Fund (QDF)
Our next choice is an exchange-traded fund, the FlexShares Quality Dividend Index Fund, which gives exposure to robust U.S. dividend equities. It started trading in December 2012 and currently has around $1.4 billion under management.
QDF, which has 135 holdings, tracks the Northern Trust Quality Dividend Defensive Index. The top 10 holdings make up about 32% of the assets. Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Johnson & Johnson (NYSE:JNJ), JPMorgan Chase (NYSE:JPM) and Cisco Systems (NASDAQ:CSCO) are the leading names in the fund.
As far as industries are concerned, QDF holdings span 12 sectors. Funds are distributed among information technology (IT) (26.01%), health care (13.17%), financials (11.90%) and consumer staples (9.13%), among others.
QDF is roughly up about 1.5% since the start of the year. The current price supports a dividend yield of around 3%. We would look to buy the dips in the ETF.
Store Capital (STOR)
Our next stock with dividends is Scottsdale, Arizona-based Store Capital, a net-lease real estate investment trust (REIT). Its customers operate in a range of industries, such as services (health clubs and childhood education centers), retail (food and restaurants), or manufacturing.
In early November, the group announced Q3 metrics. Revenue came at $175.2 million, an increase of 2.0% year over year. Net income was $54.6 million, representing diluted EPS of 21 cents.
CEO Christopher Volk, who was pleased with results, said, “Our third quarter performance reflects the strength of our investment strategy, with a highly diverse net lease contract portfolio backed by well-positioned, strong regional and national tenants.”
Investors were also pleased that Store Capital increased dividends by 2.9%. The dividend currently stands at 36 cents per share, with a yield topping 4%. In recent years, the stock found a place in Warren Buffett’s coveted portfolio.
Understandably, various levels of lockdown in 2020 have affected revenue and share price. Although the share price is down around 11% for the year, it is likely to create higher shareholder returns in the coming quarters.
Walgreens Boots Alliance (WBA)
Deerfield, Illinois-based Walgreens Boots Alliance is a pharmacy-led health and wellbeing company, operating over 9,000 Walgreens and Duane Reade pharmacy retail stores stateside. In Europe and Asia, its pharmacy stores operate under the Boots name. On Dec. 18, management announced it began administering Pfizer’s Covid-19 vaccine in care facilities.
In mid-October, the group released FY20 Q4 metrics, delivering results at high end of prior guidance. Quarterly sales were $34.7 billion, an increase of 2.3% YOY. Adjusted net earnings decreased 30.9% to $887 million. Adjusted earnings per share were $1.02, down 28.2% YOY. Management highlighted the decrease in foot traffic visiting pharmacies globally as the main reason behind weak numbers.
CEO Stefano Pessina said, “Despite uncertainty amid the global COVID-19 pandemic, we are seeing gradual improvement in key U.S. and UK markets and continued strong performance in our wholesale business. I’m also encouraged by the accelerating growth in our e-commerce platforms. Looking ahead, we are projecting adjusted EPS growth in fiscal 2021, as reflected in our new guidance.”
The dividend yield is 4.56%. WBA stock’s forward P/E and P/S ratios stand at 8.66 and 0.26, respectively. I believe the shares offer value around these levels.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation and publishes educational content on investing.