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4 Perfect Retirement Stocks for Steady Long-Term Income Growth

retirement stocks - 4 Perfect Retirement Stocks for Steady Long-Term Income Growth

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Picking retirement stocks is never an easy task. Stocks historically generated long-term gains that are bigger than those of any other asset class. However, picking retirement stocks is easier said than done. You always have a new sector upending the markets. This past year we saw that with electric vehicle stocks. Along with risky SPAC plays, they went hyperbolic. And the momentum doesn’t seem to stop.

However, retirees must figure out how to produce enough income without a job. They shouldn’t operate with the same mentality as swing traders, a trading style that attempts to capture short- to medium-term gains. Since 1926, large stocks delivered an average of 10% return per year. And at no point have they lost ground over any period of 20 years or longer during that time. But the key theme here is that you have to go long to maximize your gains. Something that retirees can do, so long as the income stream is stable.

It also goes without saying that the best retirement stocks have excellent yields. A good track record of dividend payments is a strong sign of security and is very attractive to income-oriented customers. Most of the retirement stocks we discuss in this list are real estate investment trusts, or REITs. REITs own or finance income-producing real estate across a range of property sectors. The reason for their selection is REITs must distribute at least 90% of their taxable income to shareholders annually via dividends.

Therefore, without further ado, let’s look at four of the best retirement stocks to start planning for your future:

  • Healthcare Trust of America (NYSE:HTA)
  • Extra Space Storage (NYSE:EXR)
  • American Tower (NYSE:AMT)
  • AT&T (NYSE:T)

Retirement Stocks: Healthcare Trust of America (HTA)

Real estate investment trust (REIT) on a black notebook on an office desk.
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Healthcare Trust of America is a safe way to play the medical sector. Investors are looking to fill up their portfolio with biotechs and pharmaceuticals in the hopes of striking gold. Whether or not any one of these picks manages to create a vaccine is irrelevant. Unless you diversify your portfolio with a host of names, you could get burned pretty badly. That’s where HTA stock comes in. It’s a REIT that invests in medical office buildings. Medical professionals will continue to use these buildings regardless of whether their work revolves around developing vaccines or not.

Let’s face it. Like most advanced developed nations, America is aging. The baby boomer generation has the disposable income to spend on quality medical facilities, which will keep demand up for the 25 million square feet of office space that HTA has at its disposal. Granted, there was a decrease in funds from operations per share in the second quarter of 2020. But things are pretty much back to pre-pandemic levels as of Q3. HTA hiked its dividend, reported normalized FFO of $0.43 per diluted share – a record for HTA – and revenue, NOI, adjusted EBITDA growth across the board.

From a dividend perspective, you can’t get any more rock-solid than this one. Due to the steady net operating income growth, the company has consistently increased its dividend, leading to a very healthy yield at the moment of 4.8%. Considering that it’s a REIT, expect money coming into your account on a very regular basis if you buy HTA stock. Just the kind of investment you need when you have your feet up and enjoying traveling the world or remodeling your home.

Extra Space Storage (EXR)

a roadsign that says "retirement ahead"
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Our next entry is one of the largest self-storage REITs in the U.S. and is a member of the S&P 500. It has a fairly diversified portfolio. With a dividend yield of 3.2%, it is an excellent pick for long-term growth and stable returns.

Despite the novel coronavirus pandemic, EXR managed to increase core FFO/share by 5.6% year-over-year to $1.31 in Q3’20. The business model is recession-resistant, so I am not surprised by the performance. Same-store occupancy is an excellent 95.9%, 210 basis points higher than the year-ago figure. From a financial health perspective, everything looks OK. The self-storage REIT has a solid balance sheet, with a debt-to-EBITDA of 6.07 times. That is par for the course if we are talking REITs. Its interest coverage ratio is a solid 3.7 times, and sales growth is a solid 11.3% for the last five years.

Because of the factors discussed, the payout is not in danger. By 2025, the self-storage market’s valuation is expected to grow to $115.62 billion from $87.65 billion in 2019. A compound annual growth rate (CAGR) of 134.79% over the forecast period of 2020-2025.

Ultimately, EXR stock should garner your attention because of its solid balance sheet, strong occupancy and FFO/share growth, and juicy dividend yield. Shares are not the most affordable at the moment, trading at 31 times forward price-to-earnings. However, these are retirement stocks we are talking about. At this price, you are buying into an industry that will only grow, guaranteeing sustained income for several years to come.

Retirement Stocks: American Tower (AMT)

A magnifying glass zooms in on the American Tower (AMT) website.
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For the final REIT on our list, we have another solid performer. Only this time, it’s in the broadcast communications space. American Tower is one of the largest providers of wireless communications services. The growing demand for 5G wireless streaming capability is pushing revenue higher for the communications REIT. Even before the pandemic, the world was marching to 5G network technology. But the current crisis has only exacerbated the need for faster uptake.

That provides a secular trend that AMT can exploit in the United States and foreign countries. Operations are spread across the U.S., Germany, Ghana, Nigeria, Chile, Colombia, Costa Rica, Mexico, South Africa, Uganda, Brazil and Peru. So you get a lot of geographic diversification when you buy EXR stock, always a good thing when you don’t want to hedge your bets. The company recently reported AFFO earnings of $2.29, beating analyst expectations by 22 cents and growing 14.5% year-over-year. Total revenue was up 3% year-over-year and beat Wall Street analysts’ estimates by $40 million.

AMT boosted its dividend 34 quarters in a row. The multitenant communications REIT has grown its dividend for the last nine consecutive years and is increasing its dividend by an average of 20.02% each year. American Tower pays 62.61% of its earnings as a dividend, but the yield of 2.3% is not in danger. The solid earnings and revenue growth allow the company to keep investing in the 5G expansion while maintaining healthy distributions.

AT&T (T)

a photo of the AT&T office building
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We finally have a non-REIT here. InvestorPlace readers know that I love T stock for a variety of reasons. The telecommunications giant has a solid business model and is all set to have a blockbuster 2021 due to HBO Max. There were certainly issues that the platform experienced at its launch. But these are resolved. Late last year, AT&T reached an agreement to bring the platform to Roku (NASDAQ:ROKU), finally bringing its content to one of the largest streaming services in the world.

WarnerMedia announced that its entire movie slate for 2021 will release simultaneously in theaters and on HBO Max. The movies will stream on HBO Max for one month before leaving the platform for a period of time. According to AT&T CEO John Stankey, HBO Max, which closed the third quarter at 8.6 million active subscribers in the U.S., scored another 4 million to reach 12.6 million as of early December.

Meanwhile, reports are also emerging that the company is in discussions with a group of banks to raise $14 billion to buy more 5G airwaves. The move is essential because control of 5G airwaves will decide which company will emerge as the leader in U.S. telecommunications.

Now let’s talk about my favorite aspect of the company: its dividend yield of 7.2%. This compares very favorably with the industry yield of 3.5%. Only Vodafone (NASDAQ:VOD) comes close with a 6.2% yield among its peer group. AT&T increased its dividend distribution for 10 consecutive years. If you are looking for one of the best retirement stocks for your portfolio, look no further.

On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.


Article printed from InvestorPlace Media, https://investorplace.com/2021/01/retirement-stocks-4-perfect-stocks-to-start-your-retirement-portfolio-hta-exr-amt-t/.

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