For many individual investors, the best way to build wealth over the long term is to use one or more simple, low-cost index funds, which may be all we need to build a secure financial future.
Index funds require little brain power and little attention from us. Keep adding money to the funds for years, and they should grow well for you and deliver about the same returns as the indexes they track.
A S&P500 For example, the index fund will aim to provide returns comparable to the index itself, which includes 500 of America’s largest companies.
But if you want to strive for it above average returns, you can add some individual stocks to your mix. (The Motley Fool recommends spreading your money over 25 or more, for diversification.) Here are three stocks with promising futures. See if any of them pique your interest.
1.Starbucks
Starbucks (NASDAQ:SBUX) has more than 38,000 locations around the world, where more than 381,000 employees serve coffee, tea, snacks, breakfast and much more. The company recently had annual revenues of more than $36 billion and has room to grow further.
Stocks have outperformed the S&P 500 by a wide margin over the past two decades, but that hasn’t always happened over shorter periods of time, and the company faces some challenges.
To avoid disappointment, it’s smart to buy stocks when they look undervalued, which will give you a margin of safety. Starbucks shares appear undervalued at recent levels, with a forward-looking price-to-earnings ratio of 20, below the five-year average of 28.
The attractive valuation is largely due to the fact that Starbucks posted mediocre second-quarter results, causing many investors to turn away. Some worry about its debt burden and that the country is struggling in China, its second-largest market.
However, the company’s long-term prospects appear solid: it knows how to grow geographically and introduce successful new products. It has also delivered many quarters and years of double-digit growth. Moreover, it has a valuable brand, recently estimated to be worth $15 billion and among the top 50 brands worldwide.
Long-term believers investing now can enjoy the Starbucks dividend, which recently yielded 2.8% and has grown at an average annual rate of 10% over the past five years.
2. Estée Lauder
Estée Lauder Companies (NYSE: EL) has been around since 1946 and sells cosmetics and more. Current brands include Estée Lauder, Aramis, Clinique, Origins, M·A·C, La Mer, Bobbi Brown Cosmetics, Aveda and Bumble and bumble.
Estée Lauder has annual sales of more than $15 billion, and its most recent earnings report shows that sales increased 5% year over year and net profit more than doubled. (Notably, about 80% of the global workforce is female.)
Challenged by weakness in US department stores, the company still has several strong brands and is investing internationally while expanding its digital sales channel.
In its third-quarter report, CEO Fabrizio Freda said: “During the second half of fiscal 2024, we strategically expanded our consumer reach in exciting ways, starting from Clinique’s debut in the U.S. Amazon Premium Beauty Store, which far exceeded our retail expectations. to date, to striking new flagship stores in Asia Pacific for Jo Malone London and Le Labo.”
The company’s shares appear attractively valued at recent levels, with a forward price-to-earnings ratio of 27, well below its five-year average of 38. The stock also offers a dividend, which recently yielded 2.4%, and has that payout on average 2.4% increased. annual rate of 9% over the past five years.
3. Real estate income
Real estate income (NYSE:O) is a Real Estate Investment Trust (REIT), which means it must pay out at least 90% of its taxable income as dividends. REITs typically own many properties that they rent out.
At the end of March, the company had 15,485 properties, rented to 1,552 customers in 89 sectors. Top tenants include: Dollar general, Wal vegetables, Money treeAnd Walmart.
This company is also not standing still. Realty Income’s first quarter was solid, with revenue up 33% year over year and an occupancy rate of 98.6%.
Shares look attractive at recent levels, with a forward price-to-earnings ratio of 37, below the five-year average of 43. REITs tend to be generous dividend payers, so it’s not too surprising to see a recent yield of 5.9% . And if interest rates fall in the coming years, as many expect, more investors could be drawn to REITs like Realty Income with relatively high dividend yields, sending their stock prices higher.
These are just a few of the many impressive and promising stocks you can consider for your long-term portfolio right now.
Should You Invest $1,000 in Starbucks Now?
Before you buy shares in Starbucks, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Starbucks wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $775,568!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns June 10, 2024
Selena Maranjian has positions in Realty Income and Starbucks. The Motley Fool holds and recommends positions in Realty Income, Starbucks, and Walmart. The Motley Fool has a disclosure policy.
3 Stocks That Can Help You Get Richer in 2024 and Beyond was originally published by The Motley Fool
