America's baby-boomer generation is driving the biggest mass retirement trend in America's history. Between now and 2029, an average of 3 million baby boomers will turn 65 every year. And while a significant portion of this group will work past age 65, millions plan to retire as early as they can.
Retirement takes money, and a lot of baby boomers' retirement-savings balances fall short. But that doesn't mean it's hopeless -- far from it. Many boomers are also earning more money than they ever have. And with higher 401(k) and IRA contribution limits for people over 50, now is an excellent time to capitalize on those bigger paychecks and contribute more toward your retirement investments.
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When it comes to generating long-term returns, dividend stocks can make for some of the best investments. This is especially important for people closer to retirement, since dividends can both drive portfolio growth and become a source of income.
Here's a closer look at two companies, CareTrust REIT, Inc. (CTRE 0.66%) and American Express Company (AXP 1.00%). Both have solid track records of dividend growth, as well as solid prospects that should lead to increased profits for years to come.
Baby boomers are driving growth prospects for CareTrust
With so many baby boomers moving closer to retirement, the population of Americans 65 and over is growing rapidly. From 2010 to 2035, the 65-plus population will more than double, to 79 million people. And a bigger population of older people is likely to require more healthcare facilities and senior housing than the U.S. has today. CareTrust has already started taking advantage of this opportunity.
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To start, its small size -- fewer than 170 properties owned at last count -- is likely to be advantageous for the REIT (and its investors) for the foreseeable future. CareTrust has been able to make numerous small acquisitions that don't even show up on bigger competitors' radar. Since 2016 alone, the company has acquired 47 properties in 14 states.
This aggressive growth has required a lot of both debt and new-share issuance, but so far management has delivered solid per-share value, too. Its new properties are generating cash yields above 9%, which should lead to solid per-share cash flow growth.
If management can continue delivering these kinds of financial returns on its property growth, CareTrust could make for one of the best dividend growth investments available over the next 20 years or more. At recent prices, its dividend yield of 3.9% is an excellent starting point for long-term investors looking for income and growth, too.
American Express is returning to growth
It was a little more than a year ago that American Express' partnership with Costco ended. This was a very big deal for American Express, since Costco-branded American Express cards represented around one in every 10 Amex cards out there, and were a significant profit source for the company. This was a major reason for the company's earnings falling sharply last quarter.
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But when the portion of last year's results related to Costco were removed from the picture, American Express showed that it is still delivering strong results. Adjusted to exclude Costco-related business and foreign exchange, American Express reported 8% revenue growth last quarter. Management said that the company is on track to deliver $5.60 to $5.80 per share in earnings for the full year.
The bottom line: American Express remains an absolute cash-cow business, and is set to deliver amazing long-term returns for shareholders. Over the past seven years, the company has used its strong cash flows to repurchase a whopping 27% of shares outstanding, while also increasing the dividend almost 80%. (It is set to bump that another 9% soon.)
Its current yield of 1.5% may seem paltry, but this is an investment in the company's likely ability to steadily grow the dividend for years to come. When you factor both a continuation of the share-buyback program and earnings growth into the equation, American Express is set to deliver serious value to long-term investors -- both in dividend growth and in capital gains.
