If you're investing your money through a Roth IRA, you're already on your way to achieving long-term financial security, but don't pat yourself on the back yet. To maximize your Roth IRA, you also need to own the right investments. If you're not sure if that's the case, don't worry. Our Motley Fool experts have you covered. Read on to learn which top stocks they think you ought to consider owning in your Roth IRA.
When it comes to your Roth IRA, a good strategy is to aim for holdings that will grow briskly. Obviously, there are many young, small, dynamic companies that can fit that bill, but many of them won't make the leap from small cap to large cap, and they'll require a lot of attention and evaluation on your part. That's why I favor big, established companies that can still grow briskly -- ones that you don't have to follow quite as closely and that are likely to be around for a long time. Thus, Walt Disney Co. (NYSE:DIS). Its stock has averaged annual growth of about 16% over the past 30 years, and more like 30% over the past five.
Disney is far more than just a company for kids. It offers theme parks and resorts, which generate about a quarter of its revenue. Traffic has been growing there, as has per-visitor spending. It's also a movie studio, having swallowed Pixar, Marvel, and LucasFilm, and offering investors many high-possibility movies in 2015, such as Marvel titles Avengers: Age of Ultron and Ant Man, Pixar films Inside Out and The Good Dinosaur, and Star Wars: Episode VII-The Force Awakens. The company's recent first-quarter results were strong, with revenue up 9% and adjusted earnings surging 22%.
Disney stock offers a dividend yield, too. It was recently just 1.1%, but the dividend has more than tripled over the past five years, and with a payout ratio near 25%, there's plenty of room for more growth. That's great, because dividends have been taxed at 15% for most of us for quite a while, but that tax rate may be rising soon. And dividends received in a Roth IRA are tax-free! Disney's free cash flow of more than $6.7 billion annually is more assurance of dividend stability. The stock isn't bargain-priced at recent levels, but it's likely to be a strong long-term performer.
There are a lot of different approaches you can take to building a successful retirement portfolio, but given that Roth IRAs are long term by nature, mixing in high quality growth names like Celgene Corporation (NASDAQ:CELG) can help boost returns.
Celgene is one of my favorite names for long-haul portfolios because it's one of the few companies that's willing to offer up the clarity that can come with a long-term forecast. Last year, Celgene reported that its sales climbed 18% to $7.67 billion, but in January the company issued guidance that targets sales of at least $13 billion in 2017 and $20 billion in 2020.
Of course, guidance is far from a guarantee, but Celgene has already demonstrated that it can execute. It's product portfolio includes the $5 billion-a-year multiple myeloma drug Revlimid and two other drugs, Abraxane and Pomalyst, that are also on target to eclipse the billion dollar sales mark in 2015. Since Celgene has a deep pipeline of research programs that includes collaboration deals with some of the most intriguing emerging biotech stocks, including Agios Pharmaceuticals (NASDAQ:AGIO), and a rock-solid balance sheet, it could prove to be a profit-friendly holding for years to come.
The key to success with Roth IRA investments is finding stocks that can give you immense capital appreciation. The best way to find such stocks is to look for beaten-down industries that nevertheless have strong growth potential in the long run. Right now, solar stocks are squarely in that category, and SunPower (NASDAQ:SPWR) is worth a closer look for Roth investors.
Solar has been hit hard recently as the drop in oil and natural gas prices have made alternatives to fossil fuels less attractive from a cost-benefit analysis, even with the heavy subsidies that solar power enjoys in many parts of the world. Yet, even with low fossil-fuel prices, large-scale solar projects continue to move forward, and SunPower in particular has adopted a strategy that takes advantage of its highly efficient solar-panel technology. Unlike some of its rivals, SunPower has largely focused on customers looking for high-quality installations that are also aesthetically pleasing, and catering to those high-end customers has helped SunPower keep its margins higher than some of its more price-conscious competitors. In addition, SunPower has global scope, with expertise in both residential installations and large-scale projects. With continuing pressure to find long-term alternatives to fossil fuels, solar has a lot of potential, and SunPower could make a solid performer for your Roth IRA.
Dan Caplinger owns shares of Walt Disney. Selena Maranjian owns shares of Celgene and SunPower. Todd Campbell is long Celgene. The Motley Fool recommends Celgene and Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.