A lot of times when people think about preparing for retirement, they usually make a list of stocks like banks and slow growing companies because they are "safe". Yet there are many alternatives to the typical retirement portfolio.
For instance, when you are younger, you may even benefit more from a group of growth stocks than blue-chips because of the potential share price gains. Later on, you can take that acquired wealth and buy more of the old blue-chips with your extra money.
That said, if your goal is to invest long term, then picking companies that could still be operating 10 – 20 years from now is a must. Some things just don't change.
Here are two stocks that I'd use to help build my retirement on. They both have a durability about them to keep them going for many years, but they're not your typical choices for retirement.
— BHP Billiton Limited (ASX: BHP)
The largest miner in the world may be in a cyclical industry, but its past 10-year total shareholder return is about the same as Westpac Banking Corp (ASX: WBC). That's due to a long record of raising dividends over that time. Even now the company is restructuring and working to cut costs because of the mining pullback and plans to return capital to shareholders.
It may be a good opportunity now to pick up shares at the lower end of a mining cycle for the better dividend yield, which is 3.3% fully franked. Its next big step is in oil and gas production in North America. The energy industry is taking off with LNG exports, so you can look for improved earnings once the initial developments are at full capacity. Cyclicals can be good, steady earners if you hold them for decades and buy at cyclical lows.
— Domino's Pizza Enterprises Ltd. (ASX: DMP)
This is an easier stock pick for most investors because they've experienced the product and don't need an engineering or medical degree to understand how a popular pizza chain makes its money. The company's domestic growth continues on and its expansion in Japan could potentially see the number of existing stores there double to about 600 over the next five years. Online ordering and social media exposure are also driving earnings growth.
It may not be a blue-chip stock and only offers a 1.6% yield fully franked, but for the retirement portfolio you also need fast growing companies that can grow dividend payments through steady earnings increases over many years.
