For many individual investors, the best way to build long-term wealth is through one or more simple elements, low-fee index fundswhich may be all we need to build a secure financial future.
Index funds require little thought and little attention on our part. Keep adding money to the funds for many years, and they should grow well for you, providing about the same returns as the indexes they track.
A S&P500 An index fund, for example, will aim to provide returns similar to those of the index itself, which encompasses 500 of the largest U.S. companies.
But if you want to aim above average returns, you can add individual stocks to your mix. (The Motley Fool recommends spreading your money across 25 or more, for diversification purposes.) 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 worldwide, where more than 381,000 employees serve coffee, tea, snacks, breakfasts and more. The company recently achieved annual revenue of over $36 billion and has room to grow.
The shares have significantly outperformed the S&P 500 over the past 20 years, but they haven’t always done so over shorter periods, and the company faces some challenges.
To avoid disappointment, it is wise to buy stocks when they appear undervalued, thereby giving yourself a margin of safety. Starbucks shares indeed appear undervalued at recent levels, with a forward price-to-earnings (P/E) ratio of 20, lower than its five-year average of 28.
THE attractive valuation is largely due to the fact that Starbucks reported lackluster results for its second quarter, scaring away many investors. Some are concerned about its debt level and the difficulties encountered in China, its second largest market.
The company’s long-term prospects nevertheless appear strong: it knows how to expand geographically and introduce successful new products. It has also recorded many quarters and years of double-digit growth. On top of that, it has a valuable brand, recently valued at $15 billion and ranked among the top 50 global brands.
Long-term investors who invest now can take advantage of the Starbucks dividend, which recently yielded 2.8% and has grown at an average annual rate of 10% over the past five years.
2. Estee Lauder
Estée Lauder Companies (NYSE:EL) has been around since 1946 and sells cosmetics and much more. Its brands today include Estée Lauder, Aramis, Clinique, Origins, M·A·C, La Mer, Bobbi Brown Cosmetics, Aveda and Bumble and bumble, among others.
Estée Lauder has annual sales of more than $15 billion, and its latest earnings report showed that sales were up 5% year over year and net profit was more than double. (Notably, around 80% of its global workforce is women.)
The company faces weakness in U.S. department stores, but it still has several strong brands and is investing internationally while expanding its digital sales channel.
In his third quarter report, CEO Fabrizio Freda said: “In the second half of fiscal 2024, we have strategically expanded our consumer reach in exciting ways, since the debut of Clinique on the US Amazon Prime store Beauty, which far exceeded our retail sales expectations. so far, creating new flagship stores in Asia/Pacific for Jo Malone London and Le Labo.
The company’s stock appears attractively valued at recent levels, with a forward P/E of 27, well below the five-year average of 38. The stock also offers a dividend, recently yielding 2.4%. , and increased this payment by an average amount. annual rate of 9% over the last 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 profits 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 across 89 areas. Its main tenants include Dollar General, Walgreens, Dollar TreeAnd Walmart.
This company isn’t standing still either. Realty Income’s first quarter was strong, with revenue up 33% year over year and an occupancy rate of 98.6%.
Shares look attractive at recent levels, with a forward P/E of 37, below the five-year average of 43. REITs often pay generous dividends, so it’s not that 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 attracted to REITs such as Realty Income, which have relatively high dividend yields, sending the stock’s price higher. their actions.
These are just a few of the many impressive and promising stocks to consider now for your long-term portfolio.
Should you invest $1,000 in Starbucks right now?
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Selena Maranjian holds positions in Realty Income and Starbucks. The Motley Fool has positions and recommends Realty Income, Starbucks and Walmart. The Mad Motley has a disclosure policy.
3 Stocks That Can Help You Get Richer in 2024 and Beyond was originally published by The Motley Fool
