Stepping into a hot stock at exactly the right time is plenty of fun. The fact is, however, that stock picking should be a relatively boring affair for most of us most of the time. Investors are generally best served by finding quality names and then letting time do the hard work.
That's not to suggest investors should limit themselves to just growth or just value. Likewise, a winning portfolio typically consists of dividend stocks as well as stocks of companies that pour every bit of their profits back into their own growth. Above all else, quality is the key.
To this end, here's a look four quality names that investors aiming to build a retirement nest egg should consider. They're all quite different from one another, but in all four cases, these stocks could be considered best-of-breed picks within their respective industries.
Edison International is built to last
Edison International (NYSE:EIX) is one of those boring utility companies, although there's nothing boring about the fact that it's raised its dividend for 16 straight years now. The current yield of 4% isn't too shabby, either.
And Edison International truly is an international play. While U.S. consumers most likely know the company through its Southern California Edison, its Edison Energy arm does business through partnerships in Europe, South America, and Australia as well. This mix has helped smooth out any earnings volatility the company may have otherwise suffered.
The most exciting aspect of Edison International, however, isn't its history or current dividend yield, but its future. The company is preparing for the inevitable changes coming for the utility industry. In August, Southern California Edison was given permission to install 38,000 electric vehicle chargers. And before the coronavirus pandemic took hold, the utility signed deals that will add 770 megawatts of battery-based power storage that are necessary to make use of renewable energy sources like solar and wind.
Be a logistics landlord with Prologis
Prologis (NYSE:PLD) may be one of the biggest companies few people have ever heard of. The $74 billion outfit is an industrial real estate investment trust, or REIT, that specializes in logistics. In other words, the REIT's renter base is heavily involved in shipping and delivery; most of the 976 million square feet of space it leases out is used as distribution centers.
This model could seem like a scary proposition as long as COVID-19 (and its economic impact) is in play. But that's not necessarily the way things are. Among Prologis' biggest tenants are Amazon, FedEx, and United Parcel Service. Not only are those companies not going anywhere, but the pandemic has also bolstered their respective businesses. That's a big part of the reason the company's occupancy rate as of the end of the third quarter was still a solid 95.6%,
Prologis isn't just a dividend payer presently yielding 2.3% with no growth prospects, though. While the contagion has slowed its ability to do so, the real estate investment trust is always on the hunt for new properties to purchase and then rent out.
Microsoft continues to adapt to the cloud
Income-minded investors won't be thrilled with the 1% yield Microsoft (NASDAQ:MSFT) is able to offer newcomers right now. And investors counting on significantly higher dividends from the software giant in the foreseeable future are going to be sorely disappointed.
What this company lacks in payout potential, though, it more than makes up for in marketability of its products. It's still the premier name in office productivity software, with cloud-based offerings like Office 365 driving a 21% year-over-year increase in revenue during the quarter that ended in September.
Yes, stay-at-home orders helped drive some of this new cloud-based business. Microsoft's longer-term revenue trend, however, reveals that the company was already moving in this direction before the pandemic. Its Azure interface for managing cloud computing hardware is proving hugely popular among enterprise customers, driving a 48% improvement in last quarter's server product and cloud services business.
And these are just a couple of the most noteworthy growth drivers. The company is also beefing up its online team-management tools, bolstering how it can help small businesses promote themselves on the web, and building a subscription-based ecosystem around its Xbox franchise just to name a few. These are projects that not only have a multiyear (and maybe multidecade) shelf life, but they're also business models that drive recurring revenue.
Alphabet keeps competitors at bay
If you need income right now, forget about it. Alphabet doesn't pay a dividend, and it seems unlikely it will in the future. It's all about growth with this company. But what growth it is! Last quarter's top line was up 13% year over year and higher by 15% on a constant-currency basis, renewing a growth trend that's been in place for years. Earnings growth has been a little less consistent, but overall has been much stronger for the past decade.
Skeptics will argue that nothing lasts forever, adding that Alphabet's Google may be nearing its maximum reach. That stance assumes Alphabet won't find new ways to connect with the world's web users, and ignores the company's existing position within the search engine space. StatCounter's Global Stats indicate that Google still fields nearly 93% of the globe's web searches, while its Android operating system is found on 73% of the world's mobile devices. Those numbers have remained relatively steady, too, despite stepped-up competition on both fronts.