Because of the market’s turbulence, many retirees avoid stocks. That could be a mistake. The average retirement lasts about two decades in the U.S. That’s a long time to have to self-fund expenses, and stocks are hands down the best-returning asset class over time.
Reducing unnecessary volatility is nevertheless important, and owning steadily growing businesses that pay reliable dividends is a way to fight the ups and downs. For investors seeking new additions to their income-generating investments, Apple (NASDAQ:AAPL), Texas Roadhouse (NASDAQ:TXRH), and Diageo (NYSE:DEO) may fit the bill.
Payday from a tech giant
Dividends are rare in the fast-growing tech industry, but Apple stock is an exception. The current yield is only 1.4%, but that’s not too shabby considering the payout was only initiated in 2012. It has been raised every year since, steadily climbing by more than 60%. Add to that a share repurchase program that has reduced share count by over 3% in the last year, and suddenly Apple looks a lot more lucrative to conservative investors.
The iPhone was a decade-long catalyst for growth, but that business has lately begun to slow down. However, there’s no reason to believe Apple’s days of expansion are over. The company has moved beyond smartphones, diversifying into smartwatches, home assistants, and cloud computing services like TV and music streaming. As a result, Apple stock has been able to keep steadily rising even though it’s already worth over $840 billion. Revenue and profits grew 13% and 16%, respectively, last quarter. CEO Tim Cook and company see the top line again growing in the midteens in the quarter ahead.
America loves this casual restaurant chain
The restaurant industry has had it rough the last couple of years as overexpansion has led to lower foot traffic in many areas. Texas Roadhouse has bucked the trend, though, focusing on oft-ignored suburban America. The chain’s combination of fun atmosphere and big portions at value prices has been winning with diners, supporting 65 new restaurant openings the last three years — a 13% increase in locations — and annual same-store sales increases of no less than 3.6% over that same period.
Like Apple, Roadhouse isn’t going to win any awards for best dividend payer; the current yield is 1.7%. However, much like Apple, the dividend is on the rise. Management doled out a 19% raise last quarter. The chain is still expanding, too, with another 30 openings expected in 2018. Up to seven of those will be Bubba’s 33, a sports bar the company has been testing, adding another layer to the business that could keep operations expanding in the years ahead.
The reliability of the alcohol industry
Maybe you haven’t heard of Diageo, but it’s likely you’ve heard of some of its brands. The global alcohol maker owns a diverse stable of names like Johnnie Walker, Smirnoff, Captain Morgan, Baileys, and Guinness, among others. It produces 6.5 billion liters of alcohol a year, making Diageo the world’s largest distiller. With operations spanning 180 countries and production in spirits, beer, and wine, Diageo covers a lot of ground and has provided consistent returns over the years.
So, Diageo isn’t going to blow anyone away with its growth numbers. Revenues are up only 9% in the last decade. However, sales are expected to accelerate in the current fiscal year with an expected rise in the mid-single digits, and a 9% year-to-date increase in earnings per share was reported. Diageo’s dividend currently yields 2.4%.
Even retired investors should consider adding stocks to their investment mix. Given time, they can really pay off, even in the midst of economic turmoil like we’ve seen in the last decade.
Stable business models are a good place to start, as the above total-return chart for Apple, Texas Roadhouse, and Diageo demonstrates. Add in some steady business expansion and dividend increases, and patient investors get rewards that sometimes equate to triple-digit percentage gains.
