Investing for retirement means finding stocks with the ability to pay reliable dividends and deliver long-term growth.
In today’s article I’ll ask if Segro (LSE: SGRO), Prudential (LSE: PRU) and Wizz Air Holdings (LSE: WIZZ) meet these requirements.
Segro
Property firm Segro reported its final results this morning. Adjusted earnings came in at 18.4p per share, marginally ahead of market forecasts for 18p per share. The firm, which specialises in large warehouses and distribution centres, said its final dividend would rise by 3.9% to 10.6p. This gives a total payout of 15.6p for 2015, in line with forecasts.
Segro has restructured its portfolio since 2009 and is now focused on so-called ‘big box’ logistics properties. In my view this is an excellent long-term strategy. Continued growth in just-in-time deliveries and internet shopping suggests to me that demand for these properties will keep rising.
The firm’s shares have risen by 21% over the last two years, during which the FTSE 100 has fallen by 10%.
Despite these gains, Segro shares trade at a small discount to their book value, and offer an attractive 3.5% dividend yield. They’re part of my long-term portfolio, and I’d be happy to buy more.
Prudential
Insurer Prudential was starting to look too expensive to me last year. However, the shares have now fallen almost 30% from their 52-week high of 1,761p. Prudential stock now trades on just 10 times 2016 forecast earnings and offers an attractive 3.5% yield.
Earnings per share are expected to rise by 9.5% this year. Although Prudential is exposed to the slowing Asian market, the group also has substantial US and UK businesses. Prudential is a more diversified business than many investors believe. It’s worth noting that while the share price has fallen, earnings guidance for 2015 has remained almost unchanged.
Prudential has been in business since 1848. I’m pretty sure the group will be around for many more years yet, suggesting to me that Prudential could be an ideal retirement share.
Wizz Air Holdings
If your retirement date is a long way off, you may want to consider smaller stocks with bigger growth potential. One company that might come up on your radar screen is Eastern and Central European budget airline Wizz Air Holdings.
During the 12 months to 31 January, Wizz Air’s passenger numbers rose by 21.7% as it added 19.4% to total seat capacity. This means that the airline’s load factor — a measure of how full its flights are — rose from 86.4% to 88%.
Wizz Air seems to be performing well as an airline, but I’m less convinced by the firm’s investment appeal.
One warning flag is that this company only floated on the stock market in February 2015. So many recent IPOs have performed badly within their first couple of years that I’m reluctant to invest in a business with such a short track record. Why did the previous owners want to sell?
I’m not convinced Wizz Air shares are quite as cheap as they might seem, either. The shares have a forecast P/E of 14, falling to 12 for 2016/17. This means Wizz Air trades at a premium to easyJet, even though easyJet pays a reliable dividend and is expected to deliver similar earnings growth.