Market unpredictability can be nerve wracking without a doubt, particularly in case you're in or close to retirement. Be that as it may, it can likewise prompt some valuation inconsistencies: excellent, high-yielding organizations at a bargain. So we've done some screening to discover a few great companies worth investing in.
We began by searching for stocks presently yielding no less than 4% and not more than 10% (to shake out any possibly troubled or peripheral organizations).
Next, we searched for organizations with 10 or more straight years of expanding profits. This implies, in addition to other things, that these organizations could make it through a real market downturn like in 2008 without a break in expanding dividends to shareholders.
At that point we searched for forward price/earnings ratios (we looked at consensus estimates) that are smaller than or equal to that of the forward price/earnings ratio of the S&P 500 (which was about 15.7 as of January 15 according to Birinyi Associates).
We additionally took out midstream oil and gas organizations. Some of these organizations have solid accounting reports, long histories of expanding profits, and alluring valuations at this moment (Enterprise Products Partners EPD emerges in such manner). Be that as it may, we reluctantly took these organizations out in the wake of falling oil prices.
At long last, we needed to see organizations with demonstrated wherewithal in terms of profits and dividend payments.
| Name | Ticker | # Years Increasing Dividends | Current Yield (1/21/2016) |
| Caterpillar | CAT | 22 | 5.12% |
| Emerson Electric | EMR | 59 | 4.42% |
| PPL Corp | PPL | 14 | 4.57% |
| People's United Financial | PBCT | 23 | 4.62% |
| Qualcomm | QCOM | 13 | 4.05% |
A few of the typical suspects endured the screen: Southern Co SO and Duke DUK; AT&T T and Verizon VZ. These organizations fit what we are looking for to some extent.
But we wanted to be more defensive. With that being said, here is our list:
Caterpillar (CAT): What?? Put resources into a cyclical company like Caterpillar at this stage in the financial cycle? That is by all accounts what the business sector is asking, with Caterpillar close to 5 year lows. In any case, a 5% yield on the back of 22 years of expanding profits ought to be of some solace.
Emerson Electric (EMR): 59 years of increasing dividends and a fat yield. Low energy prices are not helping Emerson, but this company is resilient.
PPL Corp (PPL): PPL Corp is generally your commonplace utility holding organization - and, with an almost 5% yield, there is nothing amiss with that. In fact a US-based organization, a lot of its income originate from the UK, offering a touch of geographic expansion.
People's United Financial (PBCT): Rising interest rates should help here. This company has posted nearly a quarter century of shareholder-friendly dividend increases.
Qualcomm (QCOM): How about some high-yielding innovation? Qualcomm's patent portfolio- - and the profits derived from it- - gives shareholders plenty of security.
There are three advantages to discovering organizations, for example, these: 1) Their profits continue coming in, even in downturns (and commonly even in recessions) 2) Many times the stocks don't decrease as much as many other companies in the S&P 500 3) the unpredictability of strong dividend payers is typically much lower than stocks that don't pay a dividend or how a little dividend yield.
Given this, I took a gander at two retirement portfolios in our openly accessiblefinancial planner for personal use and attempted to answer when each couple in the plan could retire. The main portfolio is in a S&P 500 index fund. The instability (standard deviation) for the S&P has been around 17% in the course of recent years. I then supplanted the S&P 500 asset with my dividend-growth stocks. I brought down their standard deviation by 33%. So the standard deviation for my portfolio is 10.7%.
In a standard retirement plan I find that the probability of success, once again using our financial planning software, increases by about 22% when switching to less volatile dividend-growth portfolios. This is a pretty big jump, due to the fact that they are now placed in more stable, solid dividend paying stocks instead of the S&P 500 portfolio.
Another advantage to putting resources into profit development stocks for retirement is that the important estimation of profit development stocks turns out to be almost useless if held sufficiently long on the grounds that their profit installments turn into the significant part of the aggregate return after some time. So variances amid subsidences don't affect speculators about as much, either fiscally or mentally.
Another advantage to moving into dividend-growth stocks for retirement is that the principal value of these stocks becomes nearly meaningless if hold on long enough because their dividends become the majority portion of the total return over time. So volatile movements during recessions do not impact the portfolio nearly as much, either psychologically or monetarily.