If you want the most joyful and relaxing retirement available, you need to have a portfolio of stocks that take the stress out of investing. The right choices can make the difference between needing to work during your golden years or being able to live comfortably off the fruits of your investing labors.
Certain equities can continue shining throughout your golden years. But what are these magical stocks? Below, three Motley Fool contributors show you why Broadmark Realty Capital (NYSE: BRMK), Apple (NASDAQ: AAPL), and Realty Income (NYSE: O) are superstars for your retirement portfolio.
This superstar has no debt and a high yield
Chuck Saletta (Broadmark Reality): Most of the time, when a company offers investors a high dividend yield, there are substantial risks involved. Those risks often take the form of leverage: substantial debt on the company's balance sheet. The big worry there is that if the lending market gets too tight, the business can go belly-up because it can't access the capital market to roll over its debts, even if its operations could otherwise remain intact.
With that background, imagine a company with no debt of its own on its balance sheet that offers its investors a yield in the neighborhood of 8%, paid monthly. Now imagine that the same company actually increased its per-share dividend earlier this year. Does that sound like a business whose stock might reach superstar status for a potential retiree?
Well, imagine no more, because such a company actually exists. Broadmark Realty is a hard-money, construction-focused lender that's structured as a real estate investment trust (REIT). That prior sentence is a bit of a mouthful, but it does a very good job of describing why the company offers a high payout and the market prices it with a fairly high yield.
As a REIT, Broadmark Realty must pay out at least 90% of its earnings in the form of dividends. That pretty much assures that if it's profitable, its shareholders will get a decent payout. As a hard-money, construction-focused lender, its fortunes are strongly tied to the construction industry, which is a notoriously cyclical part of the economy. That helps explain the market's overall fear that is leading to its fairly high yield.
The cyclical risks are real, but the company's debt-free balance sheet gives it much more flexibility to ride out the downswings in that cycle than it would have if it carried debt of its own. That balance of risks and rewards makes Broadmark Realty worth considering as part of a retiree's longer-term portfolio.
A consumer products juggernaut, with a dividend
Barbara Eisner Bayer (Apple): When building a retirement portfolio, it's risky to be 100% in fixed income because, due to inflation, your dollar will buy less as you grow older. Therefore, it's important to have some allocation for growth in order to keep up with or beat inflation. The superstar growth stock (that also pays a dividend — yay!) I recommend is the one and only Apple.
Apple thrived through the pandemic, as people upgraded their computers and tablets when they were forced to work from home. Then in the fall of 2020, the company had a successful launch of the iPhone 12. How successful? Within seven months, it had sold 100 million units of the 5G model. And the forthcoming iPhone 13 release is expected to see high demand as well.
Although we often see Apple as primarily consumer-focused, its services business is growing like wildfire. It now has 700 million paid subscriptions — which is up four times since 2017. And in June, services revenue was up 28% from what it was nine months before.
Finally, let's not forget that Apple is more than just a company: It's an empire. In addition to the iPhone, consumers are lapping up Apple Macs, AirPods, iPads, and the amazing Apple Watch. As of the company's first fiscal quarter of 2021, it boasted a worldwide installed base of more than 1.65 billion devices. And Apple users are fanatics, to some degree, and unlikely to switch to other ecosystems.
Oh yes…then there's the icing on the cake for retirement portfolios: As of this writing, Apple pays a dividend of $0.88 a share, which is a yield of 0.6%. It may not be much, but like with a cake, the icing makes it that much more scrumptious.
Apple is offering continued growth, a bright future, and a dividend for retirement investors. If that isn't a superstar stock, I don't know what is.
A superstar that pays out every month
Realty Income advertises itself as The Monthly Dividend Company, and it does what it says on the label: Each month, without fail, it cuts its investors a check. Currently, the REIT's dividend yield is a shade over 4%, which is a higher figure than a great many dividend stocks, even in the relatively high-yield REIT universe.
Of course, the payout has that wonderful benefit of coming in monthly. The company has a dividend reinvestment program, which is a smart idea for those still saving for retirement. Plowing those 12-times-a-year distributions back into Realty Income stock to nab even more dividends can quickly snowball your investment.
Realty Income has been doling out its dividend on the regular since 1994, meaning it's managed to squeeze out a distribution through booms and busts, not to mention the roller coaster that has been the coronavirus pandemic. As a frequent raiser, it is a Dividend Aristocrat, one of the few S&P 500 index component companies that has lifted its payout for at least 25 years in a row.
The REIT is a premier operator in its field, largely because its tenant base is so durable. Among its renters are some of the top names in American commerce, companies with sprawling retail networks such as 7-Eleven, CVS Health, Walmart, and FedEx. Even through retail apocalypses and global pandemics, these businesses endure, often because they're essential in-person shopping outlets for millions of customers.
This pack of retail kings makes Realty Income a REIT superstar. Considered the retail REIT by more than a few analysts and pundits, the company managed to grow its revenue by 11% to $464 million in its recently reported second quarter. Adjusted funds from operations (arguably the most important profitability yardstick for REITs) rose at a similar rate, landing at nearly $328 million.
Realty Income is a hardened veteran in its field and a consistent moneymaker with a rock-solid business foundation. It unquestionably deserves pride of place in any retirement portfolio.
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Barbara Eisner Bayer owns shares of Apple. Chuck Saletta owns shares of Broadmark Realty Capital Inc. and CVS Health. Eric Volkman owns shares of Apple. The Motley Fool owns shares of and recommends Apple and FedEx. The Motley Fool recommends CVS Health and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.