5 Top Stocks to Secure Your Financial Independence

These diverse growth and income stocks will help you claim financial freedom.

Sean Williams
Sean Williams
Jul 4, 2019 at 8:21AM
Technology and Telecom

More than two centuries ago, on July 4, 1776, a majority of the United Colonies (12 of 13) stood as one and officially adopted the Declaration of Independence, signaling freedom from the rule of England and paving the way for the eventual formation of the United States. Today marks the 243rd anniversary of the United States' birth.

But as we celebrate our independence in what's arguably one of the freest countries in the world, we're also reminded that most Americans remain shackled by their own finances.

At the heart of this problem is the fact that, according to Gallup, only 52% of Americans own stock. Although the stock market can be volatile at times, there is no better long-term creator of wealth, with the market averaging a historic rate of return of 7%, including dividends paid and when adjusted for inflation. No other investment even comes close to these returns over the long run.

If you want the Fourth of July to truly be associated with your independence, make today the day you start planning to invest for your future. Here are five top stocks that can help you reach your goals and firmly declare your financial independence.

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Image source: Getty Images.

Amazon.com

Amazon.com (NASDAQ:AMZN) is a service and tech giant that's dominating on multiple fronts. Its e-commerce platform is responsible for roughly 5% of all U.S. retail sales and about half all U.S. online sales. When combined with its Prime membership, which allows users shipping perks and access to its streaming content, it has one of the most loyal and predictable consumer bases around.

However, the more important cog for Amazon over the long term is its cloud business, Amazon Web Services (AWS). It has been growing much faster than e-commerce and Amazon's other business ventures, and it has considerably higher margins. In the first quarter, AWS was responsible for $7.7 billion of $59.7 billion in total sales, but slightly more than half of Amazon's $4.4 billion in operating income. AWS is going to grow as a percentage of Amazon's sales, which means it'll have an increasingly more positive impact on operating profits and cash flow per share. Although the company is already a cash flow juggernaut, Wall Street foresees its cash flow per share more than doubling between now and 2022. 

One last point: The share price of around $1,900 might seem daunting to the average investor, but just keep in mind that whether you have 100 shares of a $10 stock, or one share of a $1,000 stock, a 50% move upward delivers the same return.

A surgeon holding a one dollar bill with surgical forceps.

Image source: Getty Images.

Intuitive Surgical

Since no one gets to choose when they get sick or what condition they develop, healthcare makes for a generally recession-resistant sector. But patents and other sector quirks can still make picking out a winner pretty tricky. That's not the case with surgically assisted robotic medical-device developer Intuitive Surgical (NASDAQ:ISRG).

Its da Vinci surgical system offers the company three ways to make money. First, it nets revenue from the sale of its system to hospitals and universities, albeit this tends to be a low-margin source of sales since these machines are costly to build. Second (and here's where the lip-licking margins come into play), it sells instruments for each new procedure on its surgical system. Third, the company charges to regularly service its machines.

These latter two sources of income are high margin, and they're growing as a percentage of total sales as the company's installed base of surgical systems grows (5,114 worldwide at the end of the first quarter). 

Intuitive Surgical is also just scratching the surface on what its surgical systems are capable of. Despite holding significant share of the urology and gynecology procedural market, the da Vinci surgical system has plenty of runway to grow in thoracic, colorectal, and general soft tissue surgeries.

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Image source: Getty Images.

NextEra Energy

Growth and income together can often be hard to come by, especially in the traditionally slow-growth utility sector. However, NextEra Energy (NYSE:NEE), the largest utility company by market cap, actually offers both to investors.

Although its nearly 47,000 megawatts of net generating capacity are less than rival Duke Energy, NextEra is able to do more with its electricity-generating portfolio thanks to significant investments in renewable energy. No other electric provider has more capacity from solar and wind than NextEra Energy...period! And it doesn't plan on relinquishing this title anytime soon. A $40 billion investment in renewable projects through 2020 should see its wind generation climb to between 10,100 megawatts and 16,500 megawatts.

On the solar front, NextEra has adopted the 30-by-30 project, which aims for the installation of 30 million solar panels by 2030, leading to an additional 10,000 megawatts of generating capacity. Though renewables can be a pricey up-front investment, a historically favorable low-interest-rate environment, coupled with the lower long-term operating costs associated with renewables, should allow NextEra to grow by high single digits, as well as well as pay out between 40% and 50% of its earnings as a dividend

A smiling young woman holding a credit card with her laptop open in front of her.

Image source: Getty Images.

Visa

America absolutely runs on credit, and that's a beautiful thing if you're an investor in credit-services provider Visa (NYSE:V).

Visa owns the U.S. market. Sure, there are a handful of major competitors, but as of 2016, Visa had expanded its U.S. network purchase-volume market share to almost 51%, which is around 28 percentage points higher than the next-closest competitor. The U.S. is a highly consumption-driven market, and Visa is easily the top solution for merchants and consumers, which is an enviable position to be in. Not to mention, as a provider of credit services (not loans), Visa is pretty much immune to the impact of delinquencies during economic contractions and downturns.

Visa also has plenty of room to charge ahead in overseas markets. In 2016, it acquired Visa Europe for $23 billion, thereby boosting its reach at the time to more than 40 million merchant outlets, and spanning close to $7 trillion in global payments volume a year. But keep in mind that 85% of global transactions are still conducted in cash. This gives Visa a very long runway to grow at a high-single-digit or low-double-digit percentage, especially as it penetrates new markets in Africa, Southeast Asia, and the Middle East. 

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Image source: Getty Images.

AT&T

Lastly, your path to financial independence is about ensuring you have at least one stock that generates superior income. When it comes to high-yield stocks, AT&T (NYSE:T) and its 6.2% dividend yield is arguably as good as it gets. For added context, this 6.2% yield is more than three times higher than the current U.S. inflation rate, meaning you'd be generating a real, not just nominal, return.

AT&T is really a tale of two operations. On one hand, the company stands to benefit from the steady rollout of 5G networks across America. These considerably faster networks will likely spark a new upgrade cycle for wireless providers. More importantly, it will be a boon for AT&T's wireless division, which should reap the rewards of higher-margin data usage. There's a multiyear pathway for this growth to take shape.

On the other hand, AT&T's streaming and content services should thrive with the addition of Time Warner. The pricey acquisition brought the CNN, TNT, and TBS networks under AT&T's umbrella, with the idea being that they'll be used as a dangling carrot to lure streaming subscribers away from its rivals, and to charge higher prices to advertisers. AT&T's high-growth days may be gone, but it's as sturdy an income producer as they come.

Make today the day that America celebrates its independence and the day that you celebrate your financial freedom.