For many people, retirement income will consist of Social Security checks (which only deliver, on average, about $18,500 annually) and income from stocks. Stocks can generate income for you when you sell them, but then they're gone. A powerful way to collect income from stocks without having to sell any shares is to invest in healthy and growing dividend-paying stocks.
Dividend payers will generate a fairly reliable income stream, and one that will rise over time, as dividend-paying companies like to increase their payouts regularly, when possible. Here are three companies to consider if you're seeking stocks for your retirement portfolio.
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1. JPMorgan Chase
JPMorgan Chase (NYSE: JPM) isn't among the hottest or most exciting of stocks, but it has been a solid profit-generating business for a very long time. It's one of the biggest banks in America, with some $3.4 trillion in assets globally, and it sports a dividend that recently yielded 3.6%. Better still, it's a growing dividend, having morethan doubled over the past five years.
Dividends are one way to reward shareholders, but they're not the only way. There's also stock-price appreciation -- and stock buybacks. JPMorgan Chase is planning to spend some $30 billion buying back shares of its own stock in 2021. Given that the company's market capitalization was recently a hefty $426, that means it aims to buy back close to 7% of its shares. Here's why that's meaningful: Imagine a pizza cut into eight pieces, and that one of those pieces is yours. If that pie is cut into only six pieces, though, your piece will be a fatter one. Similarly, if many shares of JPMorgan Chase's stock are bought back and essentially retired, there will be fewer shares remaining, and each share will have a bigger claim on the company's earnings and growth.
With the economy expected to recover from pandemic-related sluggishness in the coming year, the bank's business should improve, too. Some analysts expect big stock-price appreciation, but even if it keeps growing slowly, long-term investors can enjoy a steady and meaningful income stream from dividends.
2. Digital Realty Trust
You may be familiar with real estate investment trusts (REITs), which are companies that own a lot of real estate properties, often focused on some niche such as apartments, warehouses, medical facilities, or shopping centers. They lease these properties out and collect rents. As REITs, they get tax breaks in exchange for paying out at least 90% of their income in the form of dividends. Digital Realty Trust (NYSE: DLR) is a REIT with a somewhat newfangled niche: Data centers. As the world becomes more and more dependent on digital transmissions, it will require more and more data centers, where servers and other equipment can reside. Think about cloud computing -- all that data isn't actually stored in the sky, in clouds -- it's stored in data centers.
All that suggests a rosy future for Digital Realty Trust, which sports a dividend that recently yielded 3% -- and that payout has risen by an average annual rate of 6% over the past five years.
3. Microsoft
Then we have Microsoft (NASDAQ: MSFT), which has been paying a dividend since 2003. Its payout recently yielded 0.9%, which might not sound like much -- but it's been growing at an average annual rate of 9% over the past five years. Better still, the portion of its earnings that it pays out in dividends -- its payout ratio -- was recently only 31%, reflecting plenty of room for further growth.
There's a lot to like about Microsoft, such as its prevalent Office 365 suite of productivity software. It has turned that into a subscription service, which is a smart move, as it creates a fairly dependable and predictable -- and regular -- income stream, instead of waiting for customers to decide to upgrade their software now and then. Its operating system is also rather prevalent, with morethan a billion devices running it. Microsoft is also active in plenty of other areas, such as gaming (with its Xbox), search, devices, artificial intelligence, and cloud computing.
With a market value recently at $1.8 trillion, this is a big company -- but it's still growing at a respectable clip: Consider that in its last reported quarter, revenue grew by17%, while net income surged by 33%.
If any of these companies interest you, take a closer look at them to see whether they're likely to serve you well in the years to come.
Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Selena Maranjian owns shares of JPMorgan Chase and Microsoft. The Motley Fool owns shares of and recommends Digital Realty Trust and Microsoft. The Motley Fool has a disclosure policy.
FAQs
Conventional wisdom holds that when you hit your 70s, you should adjust your investment portfolio so it leans heavily toward low-risk bonds and cash accounts and away from higher-risk stocks and mutual funds. That strategy still has merit, according to many financial advisors.
What are the best stocks for retired investors? ›
Along with Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and The Proctor and Gamble Company (NYSE:PG), Realty Income Corporation (NYSE:O) is one of the best retirement stocks to buy according to the media.
What are the Motley Fool 10 best stocks? ›
The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, and Uber Technologies. The Motley Fool recommends the following options: short June 2024 $67.50 calls on PayPal.
How much should a 72 year old have in stocks? ›
For example, if you're 30, you should keep 70% of your portfolio in stocks. If you're 70, you should keep 30% of your portfolio in stocks. However, with Americans living longer and longer, many financial planners are now recommending that the rule should be closer to 110 or 120 minus your age.
What is a good portfolio for a 75 year old? ›
For most retirees, investment advisors recommend low-risk asset allocations around the following proportions: Age 65 – 70: 40% – 50% of your portfolio. Age 70 – 75: 50% – 60% of your portfolio. Age 75+: 60% – 70% of your portfolio, with an emphasis on cash-like products like certificates of deposit.
What is a good portfolio for a 70 year old? ›
At age 60–69, consider a moderate portfolio (60% stock, 35% bonds, 5% cash/cash investments); 70–79, moderately conservative (40% stock, 50% bonds, 10% cash/cash investments); 80 and above, conservative (20% stock, 50% bonds, 30% cash/cash investments).
What is the number one retirement stock? ›
Commercial real estate investment trust Realty Income (NYSE:O) tops the list of retirement stock stars. Billed as the Monthly Dividend Company, the REIT recently made the 644th consecutive monthly dividend payment in its 55-year history. Since going public in 1994, Realty Income has increased its payout 123 times.
What is the best portfolio for a retired person? ›
Some financial advisors recommend a mix of 60% stocks, 35% fixed income, and 5% cash when an investor is in their 60s. So, at age 55, and if you're still working and investing, you might consider that allocation or something with even more growth potential.
Should retirees pull out of stock market? ›
Over the long term, stocks outperform bonds. So, stock market investments should be one component of a plan you use to prevent your savings from running dry before the end of a retirement that can last 20 or 30 years or longer.
What stock will boom in 2024? ›
10 Best Growth Stocks to Buy for 2024
| Stock | Implied upside from April 25 close* |
|---|
| Tesla Inc. (TSLA) | 23.4% |
| Mastercard Inc. (MA) | 19% |
| Salesforce Inc. (CRM) | 20.8% |
| Advanced Micro Devices Inc. (AMD) | 30.1% |
6 more rowsApr 26, 2024
The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Nvidia, and UiPath. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel.
What are the 5 top AI stocks you can buy right now with The Motley Fool's Epic bundle? ›
The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Amazon, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends Super Micro Computer and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft.
How many people have $3000000 in savings in the USA? ›
How many people have $3,000,000 in savings in the USA? There are estimated to be a little over 8 million households in the US with a net worth of $3 million or more. I very much doubt that any of them have that amount in savings. A good many of them reach that level because of a large equity in an expensive home.
What percentage of retirees have $4 million dollars? ›
According to a 2020 working paper from the Center for Retirement Research at Boston College, the top 1% of retirees-which a retiree with $4 million in assets would fall into-can expect to pay about 22.7% in state and federal taxes.
What is a good net worth at 70? ›
For example, one rule suggests having a net worth at 70 that's equivalent to 20 times your annual expenses. If you spend $100,000 a year to live in retirement, you should have a net worth of at least $2 million.
What percentage of stocks should a 70 year old have? ›
For example, if you were 70 years old, you'd have about 30 percent allocated to stocks. “That formula is generally a good place to start,” says Keith Beverly, chief investment officer at wealth management firm Re-Envision Wealth.
Should a 75 year old be in the stock market? ›
The general rule is that the younger you are, the more risk you're able to tolerate. The older you get, though, means you must cut back on the amount of risk in your portfolio. The common rule of asset allocation by age is that you should hold a percentage of stocks that is equal to 100 minus your age.
How much money do most 70 year olds have? ›
According to the data, the average 70-year-old has approximately:
- $60,000 in transaction accounts (including checking and savings)
- $127,000 in certificate of deposit (CD) accounts.
- $17,000 in savings bonds.
- $43,000 in cash value life insurance.
There are no set ages to get into or to get out of the stock market. While older clients may want to reduce their investing risk as they age, this doesn't necessarily mean they should be totally out of the stock market.
