Before hitting retirement age, you potentially could have 10, 20, even 30 years of good dividend income and share price growth, so getting the right mix of stocks is essential. Apart from different industry types, stocks also have characters of their own as the companies behind them develop as businesses.
Slow growers are companies that perhaps were strong in their day, but now have slipped into mediocre sales and earnings growth. They may not lose you money, but they keep you from maximising your returns with other more nimble stocks. Pass these over even if they look cheap.
Stalwarts still have good growth and have grown large enough as companies to be stable, predictable income providers for many years. Every portfolio needs several of these at least to get that firm foundation of dividend returns.
Fast growers are those that can still see earnings growth above 12% over the next 5-10 years. Later on they could transition to stalwarts, but for now we want them to amass earnings growth to drive share price growth.
Here are four stocks you could add to your portfolio to help fund your retirement years.
1) SEEK Limited (ASX: SEK)
The operator of the number-one job search website Seek is a fast grower. Earnings are still growing at double digits well above my 12% threshold. It is powering longer range growth by expanding into Asia as a leader in job placement and training. Dividend yield is 1.5%.
2) IOOF Holdings Limited (ASX: IFL)
It may be a little early to call it a stalwart, but its very generous 5.3% dividend yield and high dividend payout ratio do provide shareholders the income they rely on. The financial services provider has stable earnings growth to keep dividends growing as well.
3) Challenger Ltd (ASX: CGF)
This fund management firm offers annuities and other long-term or retirement related products. Because of the recent growth and popularity of superannuation and self-managed super funds, it has seen a strong rise in share price and offers a decent 3.0% yield.
4) BHP Billiton Limited (ASX: BHP)
The biggest mining company on the ASX is a true stalwart. Mining is a cyclical industry of ups and downs, but BHP is well diversified, covering even oil and gas. Right now it is cutting costs to improve its margins and may have a capital return in the near future, so shareholders could see a special dividend or a share buyback. Its dividend yield is 3.4%.
