The notion of investing in retirement stocks may bring to mind the latter stages of one’s career, yet recent years have demonstrated that the timing for such considerations is perpetually apt. From the impacts of Covid-19 to the upheaval caused by meme stocks and a record number of interest rate hikes between March 2022 and July 2023, concerns about retirement planning have been at the forefront.
Given the 8.7% increase in Social Security cost-of-living adjustments in 2023, more seniors may find themselves subjected to federal income taxes on their benefits in 2024. Hence, the present moment presents an opportune time to evaluate the top retirement stocks.
In my quest for retirement stock options, I focus on dividend companies showcasing ascending returns.
According to data from Hartford Funds spanning from 1972 to 2019, S&P 500 dividend-paying equities have outperformed lower-volatility payers. Dividend initiators and growers yielded returns of 10.19%, while nonpayers generated 4.27%.
Research from Ned Davis supports the notion that dividend-paying equities exhibit lower betas of 0.89 and a standard deviation of 16.15%, rendering them less volatile compared to non-dividend-paying companies.
A corporation with a history of profitability over the last decade is more likely to maintain a robust dividend yield, having weathered recessions, pandemics, and an assertive Federal Reserve. Moreover, a stock with a “strong buy” consensus, even if priced higher, holds promise, as opposed to investing in a cheap yet underperforming asset.
Spotlight on Federal Realty Investment Trust (FRT)
Federal Realty Investment Trust (NYSE:FRT), emerges as a contrarian choice among the top retirement picks. Despite reporting lackluster first-quarter 2024 funds from operations at $1.64 per share, the company’s profitability downturn has cast a shadow over market sentiment.
Considering FRT’s obligation to distribute 90% of taxable income to shareholders as a Real Estate Investment Trust (REIT), monitoring the stock warrants keen attention. Notably, Federal Realty has extended its streak of dividend increases to 56 years, offering a quarterly cash payout of $1.09 per common share.
With a “strong buy” rating and a projected 12.2% upside, FRT has demonstrated profitability over the past decade, surpassing the performance of the majority of the 833 REITs assessed.
Furthermore, FRT is executing strategic initiatives to bolster profitability, including a substantial redevelopment project in Bala Cynwyd, Pennsylvania. The venture encompasses a new six-story residential complex featuring 217 apartments and 16,000 square feet of retail space, with an anticipated cost of $90-$95 million and a projected 7% return on investment. Additionally, Federal Realty has greenlit a second phase of the Bala Cynwyd project, with an estimated investment of $170 million.
In recent developments, FRT undertook a $485 million senior notes issuance due in January 2029 and secured a $200 million mortgage loan for its subsidiary, Bethesda Row. This prudent financial maneuver involved the repayment of $600 million in senior unsecured debt in January, evidencing a balanced approach to financial obligations.
Analyzing Walmart (WMT)
Walmart (NYSE:WMT), despite contending with fierce competition from industry titan Amazon (NASDAQ:AMZN), stands as the world’s largest retailer and a revered Dividend King, having raised dividends annually since March 1974.
While Walmart’s “strong buy” rating and potential upside exceeding 8%—based on a $73.85 target price—may not match the growth potential of stocks like JD.com (NASDAQ:JD) or Roblox (NYSE:RBLX), such dynamics are emblematic of top-tier retirement selections.
Walmart has surpassed 99.67% of the 299 retail-defensive entities, demonstrating consistent profitability over the past decade.
Spanning Q1 FY2025, Walmart reported sales of $161.5 billion, exceeding expert estimates of $159.5 billion. The earnings-per-share stood at $1.34, surpassing the anticipated $1.31. Walmart has set a sales growth target of 3% to 4% for the fiscal year concluding in January 2025.
Moreover, Walmart’s strategic acquisition of Vizio (NYSE:VZIO) for $2.3 billion showcases its commitment to enhancing its Walmart Connect advertising arm. Additionally, collaborations with Agritask seek to bolster supply chain sustainability, underlining Walmart’s forward-thinking approach to growth.
Unraveling the Performance of AT&T (T) Stocks
The Telecom Titan
Source: Roman Tiraspolsky / Shutterstock.com
AT&T (NYSE:T) wraps up our exploration of the best retirement stocks with an industry-beating yield of 5.8%, a potential upside of around 17%, complimenting a “strong buy” rating, showing how far it has come from the messy Time Warner merger issues.
Following AT&T’s spinoff of Time Warner, CEO John Stankey has repeatedly pledged to build its fiber and 5G businesses. AT&T wants to cut debt and focus on telecom aggressively. Total long-term debt dropped from $230 billion in March 2022 to $132.8 billion in Q1; T’s targeting a debt-to-EBITDA ratio of 2.5 by 2025.
With a revenue of $30.03 billion, AT&T somewhat missed expert projections of $30.62 billion. Still, the business had a net profit increase, with operational income jumping by 29.3% year-over-year to $6.4 billion. With a free cash flow of $4.2 billion, AT&T exceeded analysts’ estimate of $3.60 billion. Additionally, the company’s profitability for eight of the last 10 years is better than 53% of the telecom industry.
For the whole year, AT&T is on target to generate at least $16 billion in free cash flow. Ahead of time, the company reached its $6 billion cost-cutting target; during the following three years, it intends to lower expenses by an extra $2 billion.