When people think about investing for their retirement, they tend to place their nest egg’s in the hands of mutual fund managers. For some reason people prefer to blindly trust people they have never met, and are disappointed when their retirement accounts hardly outpace inflation–and in some cases even lag the major indices. It is time to take control of your own retirement future, and I am here to lay out a few options for your retirement portfolio.
When it comes to retirement everyone loves to focus on dividends. Anyone can check out a stock screener and pick a handful of companies with high yields and call it a day. If only saving for retirement was that simple right? There are a few metrics as important as yield when analyzing whether or not a company is right for your retirement account. Things such as volatility, payout ratio, and the company’s dividend history are also extremely vital pieces of information. We are looking for companies in stable, somewhat “boring” industries that dominate their respective markets, generate vast quantities of cash, and have a long history of increasing dividends. Let analyze a few of my favorites.
McCormick & Company, Incorporated (NYSE:MKC) – Yes this is the same McCormick we all see every time we step foot into a grocery store. The spice giant has an estimated market share that is more than double that of its closest competitor, and there is plenty of room for growth. McCormick has a very long and stable dividend history, increasing dividends every year (adjusting for stock splits) for just over 20 years. The company has a beta of .24, meaning it is significantly less volatile than the market, and a payout ratio of 41%, demonstrating its ability to maintain its dividend if there is an unforeseen decrease in revenue. McCormick also presents great growth potential as it continues to develop new products and expand into emerging markets, such as China. One area of concern is the PE ratio. Currently, McCormick trades at around 20 times earnings, which for me is a bit pricy, so I would do some additional research and pounce on a pullback.
Intel Corporation (NASDAQ:INTC) – When one talks about best of breed or truly owning a company that controls the market, fewer names come quicker to my mind than Intel. The company has traditionally operated in the PC micro processor space with only meager competition from the likes of AMD and Texas Instruments. Rumors have recently escalated that Intel and Apple executives have been in discussions concerning collaboration, as Apple attempts to reduce its reliance on Samsung, considering it is its biggest competitor. If Intel is able to successfully break into the mobile phone market, considering it already controls approximately 80% of the notebook processor market, the sky would be the limit from a growth perspective. Intel also deserves some additional attention due to its dividend. The company has increased dividend payouts in each of the last 12 years and currently yields 4.20%. With a volatility in line with the markets and a payout ratio at a very manageable 41%, Intel Corporation (NASDAQ:INTC) is a company that can find a home in any retirement portfolio.
General Electric Company (NYSE:GE) – Once again another company that seems just plain boring. GE has been going through a makeover recently as CEO Jeff Immelt attempts to streamline the company’s operations by placing an emphasis on what they do best: energy, infrastructure, and innovation. From the sale of its stake in NBC Universal to Comcast, as well as weaning the company off the cash cow that was GE Capital, Immelt is attempting to guide GE down the correct path after years of what Peter Lynch would call “deworsification.” The CEO also announced in his annual letter to shareholders that GE will be returning upwards of $18 billion to shareholders via dividends and stock buybacks in the coming year. General Electric Company (NYSE:GE) has an above average dividend yield of 3.20% with a manageable payout ratio of about 50%. However, the company’s dividend history is not nearly as stable as the companies above, having been hit hard by the 2008 financial crisis. GE also trades at a PE of 18.12, which might be a little pricy right now.