Investing successfully is often the key to retiring early. Picking the right stocks -- and careful financial and budget planning, of course -- can make sure that you don't have to come out of retirement. Dividend income is part of your strategy, but more than that, you want reliable names that will continue to appreciate over time.
I think Costco (COST -12.45%), Walt Disney (DIS -4.00%), and Invitation Homes (INVH -3.17%) are three strong investments that will help you make the most of your golden years. I own all of them, and I'm not retiring anytime soon. Let's see why they might be smart additions to your portfolio.
There aren't a lot of companies that have a knack for doing right by all parties. Costco has struck the right balance of pleasing its employees, customers, and shareholders. The warehouse-club operator has been at the forefront of paying and treating its employees well. Shoppers love the great prices of the cost-efficient business model, where the markups are so small that membership fees from its 105 million cardholders make up the lion's share of the bottom-line results.
Finally we get to shareholders -- potentially you -- who benefit from one of the best-run businesses on the planet. Costco is an all-weather stock, and now its resilience is even pandemic tested. Costco has increased its dividend every year since initiating distributions in 2004. The next is likely just a few weeks away.
The 0.8% yield may not seem like much, but that's just based on the quarterly payouts. Costco has routinely declared much larger one-time dividends.
If Costco's 0.8% yield doesn't impress you, Disney's going to fare even worse for income seekers. Disney suspended its distributions during the pandemic. The dividend will come back eventually, but investors have had no problem bidding the House of Mouse higher despite a current 0% yield that looks like Mickey Mouse caught in quicksand.
Disney is hitting new highs despite three quarters of declining revenue because it is unmatched in the realm of entertainment. When the going is good -- and we'll get there perhaps sooner rather than later -- Disney runs the world's most-visited theme parks. Disney also cranks out the most-watched movies, and that's because no one comes even close to its arsenal of intellectual properties.
Disney seemed to have it all before launching Disney+ in late 2019, and its bar-raising streaming service is already at more than 100 million premium subscribers. Owning Disney will also make your grandchildren, your nephews, or your neighbor's daughter think you're cool.
Retirees screening for REITs won't see Invitation Homes anywhere near the top. It currently yields just 2.1%. However, you're going to warm up to the business model. Invitation Homes is a leader in buying properties that it can spruce up and rent out.
Historically speaking, the capitalization rate on rentals isn't off the charts. We're talking about a return of 6% to 8% for the industry. Invitation Homes excels here because of its scalability. Its emphasis is on thriving regional markets. A whopping 95% of its revenue comes from growing Western, Sunbelt, and Florida markets that have strong rental and property appreciation momentum. It generates 96% of its revenue in markets where it has more than 2,000 homes. Density helps drive service efficiency, but it also makes Invitation Homes smarter, with stronger revenue management intel. Finding new renters in these appreciating assets doesn't take long when someone moves out, as it's clocking in with a stunning 98.3% occupancy rate last month.
Costco, Disney, and Invitation Homes may not seem like core holdings when it comes to retirement planning, given the weak yields, but yield isn't everything. Costco, Disney, and Invitation Homes have the catalysts in place to continue growing in the years if not decades to come.