Typically, any discussion around retirement stocks usually includes well-known names such as The Coca-Cola Co. (KO), Johnson & Johnson (JNJ) and McDonald’s Corporation (MCD). These are Fortune 500 companies with huge global operations paying healthy dividends yielding 3% or more.
While it’s more than OK to own these types of stocks in your retirement portfolio, sometimes it pays to follow the road less traveled. Contrarian investors like David Dreman made a career (and a fortune) out of doing the unexpected.
To qualify for this list of the best retirement stocks, these picks must yield at least 1.5%, have a market cap of at least $2 billion and recorded an operating profit in each of the past five years. That will help ensure quality. However, these stocks also all have average daily volumes of less than 500,000 — in other words, they’re not widely traded, and as a result, they’re typically not widely covered.
These retirement picks might not be popular in social media, but they’ll get the job done. And that’s the only thing that really matters.
Scotts Miracle-Gro
Symbol: SMG
Dividend yield: 2.2%
If you have a great-looking lawn at home, it’s probably in part because you or your gardener use one or more products made by Scotts Miracle-Gro Co., an Ohio company that specializes in lawn and garden products.
Fiscal 2016 was a transformational year for Scotts. It undertook Project Focus, a group of initiatives meant to extract value from its non-core assets while doubling down on its U.S. lawn and garden business. Since SMG announced the plan in December 2015, its stock is up 37%.
“I have no beef with the recent performance of the company,” Scotts CEO Jim Hagedorn said announcing Project Focus. “The changes we’re making have little to do with near-term performance. It’s about securing our long-term future.”
Over the past five years, Scotts Miracle-Gro has increased its adjusted income from continuing operations from $104.7 million in fiscal 2012 to $241.1 million in fiscal 2016. In Q1 2017, Scotts Miracle Gro increased revenues by 27% year-over-year while reducing its non-GAAP pro forma loss to 95 cents per share, from $1.13 in the year-ago period.
Don’t be alarmed by the losses, by the way — Scotts traditionally loses money in the first quarter. In fact, despite that Q1 loss in 2016, SMG nearly doubled its profits for the full year, to $315.3 million.
Scotts Miracle-Gro will continue to do well as long as people have lawns that need maintaining. That’s a long time.
Femsa
Symbol: FMX
Dividend yield: 1.5%
Fomento Economic Mexicano SAB or Femsa for short, is kind of like Coca-Cola, only it has more growth, and it does all of its business outside of the U.S. In fact, the only meaningful source of revenue from America is generated by a 20% stake in Heineken NV (HEINY).
As for Coke, Femsa owns 47.9% of Coca-Cola FEMSA, S.A.B. de C.V. (KOF), the largest franchise bottler of Coca-Cola in the world by volume. Coca-Cola Femsa operates in Mexico, Brazil, Argentina, Colombia, Central America, Venezuela and the Philippines.
Its main business is the 100%-owned OXXO convenience store chain. It operates more than 15,000 stores in Latin America and is one of the largest in the world. (And, of course, you can buy Coke products at all of them.) In 2013, Femsa acquired two Mexican drugstore chains; it now operates more than 1,000 drug stores in Mexico and other parts of South America, and more will open in the years ahead.
This stock has not performed very well in the past five years, but these are stocks that will take care of you in the future. Fomento’s emerging-market exposure will help it outperform the S&P 500 in the years ahead.
EPR Properties
Symbol: EPR
Dividend yield: 5.5%
If you’ve been to a movie lately, it’s possible the theater you watched it in is owned by EPR Properties. EPR is a Kansas City-based real estate investment trust (REIT) that specializes in the ownership of movie theaters and other entertainment-related real estate, along with some other interesting investments including the real estate on which 120 schools (public and private) sit.
In case you hadn’t noticed, retailers are getting hammered by the trend toward experiences and away from buying stuff. That’s especially true of the millennial generation, a group of 75 million Americans who value experience over ownership.
Well, experiences are EPR’s wheelhouse. Experience-based real estate is responsible for almost 74% of its revenue, putting this REIT in a prime position to benefit from this trend.
More importantly, EPR is well-managed and had the foresight over the past five years to de-risk its business by reducing its reliance on a few large tenants. In fiscal 2011, its top five tenants accounted for 64% of revenue; today, that’s down to about 45%. AMC Entertainment Holdings Inc (AMC) is currently EPR’s largest tenant, accounting for 20% of its overall revenue.
I first recommended EPR back in April 2013, when its stock traded at $53.27. Today, it sits around $73.75 — 38% gains, and that doesn’t include the healthy 5%-plus dividend yield.
Long-term, I expect EPR to not just outperform the market, but also outperform this group of retirement stocks.
For the complete article please visit
Kiplinger's
ABOUT
Dynamic Wealth Research was founded on the principle the world is changing at an ever-increasing pace. The greatest profit opportunities an investor will ever find are from massive, sweeping changes. Dynamic Wealth Research analyzes and closely follows these changes, keeps its readers on the leading edge of them, and shows you how to be best positioned these anxious, interesting, and ultimately profitable times.
