2 retirement stocks to buy in 2024

As investors head into the new year, many may be looking to add cash to their existing plans or Roth IRA plans. Often these contributions flow into index funds, which offer diversification and a long history of growth.

However, for those interested in individual stocks, conservative investments that can deliver increased income streams and potential share price appreciation may be the best option. In the consumer sector, both real estate income (o -0.12%) and McDonald’s (MCD 0.11%) This purpose can be achieved. Here’s why:

real estate income

Realty Income is a real estate investment trust (REIT) that owns more than 13,000 properties in the United States and four European countries. There is a single tenant under a long-term net lease. This means that the tenant pays the property’s maintenance, taxes and insurance, and Realty Income profits from the rental income.

Investors can know the Realty Income for the buildings they own rather than for the company. Your customer list includes all types of retailers, restaurants, and professional businesses such as auto repair shops or fitness centers. walgreens, dollar plainand tractor supply Here’s an example of a company leasing space on Realty Income.

Retirement investors will also like that this company claims to be a “monthly dividend company,” with monthly payouts backing it up. The current annual dividend is nearly $3.08 per share, resulting in a dividend yield of 5.4%. Additionally, with four payout increases in 2023 alone, its appeal as an income stock will continue to grow.

In the first nine months of 2023, sales totaled $3 billion, up 22%. Unfortunately, while the company generated $2.1 billion in funds from operations (FFO), which is a measure of free cash flow (FCF) for a REIT, its interest expenses hit its bottom line. This fully covers dividend costs of approximately $1.6 billion for the period.

Of course, stock prices are down slightly this year due to the aforementioned interest rate hikes. Despite this, Realty Income’s price-to-earnings (P/E) ratio is 43. While this revenue multiple may seem high due to high depreciation and amortization costs, it is actually historically low. Now that interest rates are falling again, stocks and dividends are likely to be higher in 2024.

McDonald’s

Investors and consumers alike know McDonald’s as the iconic fast food hamburger restaurant that can be found in nearly every city in the United States and in more than 100 countries around the world. Still, when you look at its business model, it seems to have more in common with REITs than with restaurants. Because the company owns its restaurant properties, it makes the most profit from franchise-related fees and rental income.

In fact, it owns a small portion of the restaurant. Since it collects a 4% commission on franchise sales (5% for new franchises, starting January 1), it has some exposure to the overall economy. However, deriving most of your income from rent and franchise fees can limit the negative impact of an economic downturn.

The company is also testing a beverage chain concept called CosMc’s. It’s still early days, but lines stretching for hours hint at CosMc’s potential success. This could pave the way for new franchises that could fuel further growth.

In fact, the company has thrived even without Cosmack. Revenues for the first nine months of 2023 were $19 billion, a 10% increase over the same period in 2022. A 9% increase in global comparable sales drove most of this increase. Net income also increased by a whopping 50% to $6.4 billion as operating expenses decreased year-over-year.

So far, the stock price has risen less than 10% compared to last year, so no such profit has occurred. However, the annual dividend is $6.68 per share, generating an additional 2.1% return.

Dividends have increased every year since 1976 and will continue to serve as a growing source of income. Additionally, income investors should feel safe about this stock, with FCF of $5.5 billion in the first nine months of the year, financing dividend expenses of $3.3 billion.

Finally, the P/E of 26 is consistent with historical averages and may seem cheap given recent earnings growth in existing businesses. If CosMc’s becomes the next major franchise operation, it could be a significant catalyst that bolsters McDonald’s stock and dividend for years to come.