Buy-and-hold investing can prepare you for a great retirement
It’s safe to say that stocks play a valuable role in retirement planning, no matter how close you are to the golden years. Stock markets can be one of the best tools for building wealth over time and growing a nest egg that will keep you comfortable late in life. While some people are quick to mention the risks of investing, the truth is that the risk of missing out on the profits that the stock market has to offer year after year is far more worrying.
With this in mind, retiring investors need to be extremely selective about the companies they will own over the long term. Choosing to invest in reliable companies that reward long-standing shareholders can lead to huge profits over the years, while too many volatile names can make buy-and-hold investing a chore.
So, make a list of 3 stocks to buy and hold for retirement so you can get a feel for the types of companies to look out for. Let’s take another look below.
One of the most important pillars of retirement planning is to benefit from companies that pay dividends. This allows investors to earn additional income for reinvestment over the years, or even live on their dividends after retirement. Reliable dividend paying companies in high-growth market segments are ideal, and so is Cisco Systems. It is a global leader in communications equipment, selling a wide range of network, security, collaboration, applications, and cloud products.
Cisco is a good option for buy-and-hold investors because of its solid balance sheet and long-term upside potential given the high demand for data center solutions, migration to cloud networks, and the 5G roll-out. A strong balance sheet is important as it allows the company to reward shareholders with dividend increases and share buybacks, and with $ 24.5 billion in cash at the end of the first quarter, it’s clear Cisco has enough capital to run that Trend to continue. Cisco stock currently offers a dividend yield of 2.6% and recently increased its payout by 14%. So, consider adding stocks for income and offering a more conservative way to get involved in the tech sector.
Consolidated Edison (NYSE: ED)
Utility stocks are a good place to look for buy and hold opportunities, as these companies have low demand elasticity and established companies that investors can rely on regardless of what happens in the economy and the market as a whole. Consolidated Edison stands out as one of the top utility companies serving customers in New York and some parts of New Jersey with steam, natural gas, and electricity. Keep in mind that Consolidated Edison’s tariff regulated electricity and natural gas distribution in New York helps reduce the volatility of corporate earnings, which is certainly attractive to conservative investors.
Consolidated Edison, one of the largest solar park owners in North America, also has a clean energy business that is attractive to long-term buyers. We know the world will focus heavily on renewable energy sources for the next decade, which could result in earnings growth for the utility company. The fact that Consolidated Edison has increased its dividend for 47 straight years and offers a dividend yield of 3.81% ultimately makes it a fantastic option for buy-and-hold investors.
Costco Wholesale Corp is another great example of a company that investors can rely on over the years. With 817 warehouses in the US, Canada, Mexico, UK, Japan and other countries, the company has a huge customer base and sells staples in bulk that people will always need. Costco is unique in that it offers consumers great deals that many other competitors simply cannot match, which in turn translates into loyal customers and recurring revenue in the form of membership renewals.
While many other retail companies struggled during the pandemic, Costco has only gotten stronger, which is testament to how successful its business model is. The company is also expanding its e-commerce sales channels, which could be a nice earnings growth driver for the next several years. After all, investors can expect numerous share buybacks and both regular and special dividends from this retail giant over the years, making it a very strong buy and hold option for retirement.
Costco Wholesale is part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.