The 2022 bear market could go down in history as one of the toughest years for investors.of NASDAQ Composite The index is down about 30% since January, and some growth stocks are down more than 90% from their peaks.
The drop has devastated some investors who hoped to retire soon, and many have reassessed their appetite for risk. But for retirement investors who still want market exposure, microsoft (MSFT -0.80%), Cisco Systems (CSCO -1.08%)When International office equipment (IBM -0.49%) You need to lower your risk while increasing your profit potential.
You can trust your money with this tech giant
Justin Pope (Microsoft): Since its founding in 1975, Microsoft has grown to be one of the world’s largest companies and today is a technology conglomerate with a market capitalization of $1.8 trillion. Technology companies can find it difficult to stay relevant in an industry where new competition is constantly emerging. But Microsoft has kept up with the times. Microsoft’s Windows operating software is its legacy business, a powerhouse with a 75% market share in the global desktop computer market. But one of his most important segments today, the cloud platform Azure, didn’t launch until 2010.
Strong execution has driven revenue and profit growth for decades and should continue to do so. Analysts believe the company can grow his earnings per share (EPS) by an average of 11% annually over the next three to five years. The stock price may be irrational in the short term, but growing earnings will shine in the end. Investors can be happy with the company’s long-term stock performance if Microsoft continues to grow earnings as it has in the past.
MSFT Revenue (TTM) Data by YCharts
But retirement is not just about increasing your wealth. You also need passive income, and Microsoft ticks that box. The dividend yield isn’t his highest at 1.1%, but the company continues his 20th consecutive year of dividend increases. A 26% payout ratio on the dividend means the dividend is well-funded and should grow over the next few years. Stocks are a double hit of growth and dividends and can play a key role in a retiree’s long-term investment strategy. Equally important, stocks keep you from staying up late and allow you to enjoy the golden age.
Cisco is a good proxy for the S&P 500
Jake Larch (Cisco Systems): Stability can be hard to find in the tech field. Price fluctuations are severe. Moreover, many technology companies are in the red. In many cases, they promise investors that current growth will lead to profitability – sometimesBut stability-seeking investors want to see profits today, not in the distant future. If that’s what you’re after, Cisco is a technology name worth considering.
Cisco is most widely known as a manufacturer of communications and Internet hardware. However, the company has expanded its business to include high-growth areas such as data center management, cloud computing, and cybersecurity.
SPY total return level data by YCharts
As the chart above shows, Cisco’s price performance is S&P 500Over the past decade, the Cisco and S&P 500 total returns have been within 7 percentage points. Besides, Cisco’s dividend yield (3.1%) is SPDR S&P 500 ETF Trust (1.2%), which helps investors earn income from their portfolios.
Additionally, Cisco’s price/earnings ratio (P/E) is low at 13.9 on a future earnings basis. This means Cisco is relatively cheap compared to most tech stocks. In fact, its P/E is typical of industrial stocks and tied to the health of the economy as a whole. With the U.S. economy likely to pick up momentum after his 2022 downturn, Cisco is a worthwhile stock to hold for its stability and consistent returns.
This venerable tech heavyweight has become a cloud dividend stock
Will Healy (IBM): Indeed, IBM stock in the 2010s gave investors little reason to celebrate. Growth stalled in most of the legacy businesses, and the stock lost about half its value between his 2013 peak and his March 2020 bear market trough.
But in 2019, IBM rolled the dice on a bold cloud-driven transformation, spending $34 billion to acquire Red Hat. The move saw Arvind Krishna, head of IBM’s cloud segment, less than a year later he became IBM’s CEO. Under his leadership, IBM has become increasingly recognized as a leader in Hybrid His Clouds, products that enable seamless interaction between Private His Clouds and Public His Clouds.
Since becoming CEO, Krishna has also acquired over 25 cloud and artificial intelligence companies and spun off their managed infrastructure business, now kindrilThese improvements boosted IBM’s stock price by more than 45% during Krishna’s tenure.
IBM Data by YCharts
But how does it help post-retirement investors?
For example, IBM increased revenue by 8% in the first nine months of 2022 compared to the same period last year. This is a notable improvement after years of flat earnings.
Second, free cash flow has traditionally been one of the reasons for buying IBM stock, and a thriving cloud business should strengthen that cash position. The company expects him to have $10 billion in free cash flow in 2022, up from $6.5 billion in 2021 as he faced disposal costs from the Kyndryl spinoff.
Third, retirees can benefit from payments that become cloud dividend stocks. IBM plans to spend his $6 billion on dividend costs this year. That means the company’s free cash flow can easily be used to pay the bills. And the annual dividend of $6.60 per share he yields 4.5%, well above the S&P 500’s average cash yield of 1.7%.
IBM’s dividend has also increased for 27 consecutive years, making it a dividend aristocrat. And since aristocrats tend to retain their status whenever possible, dividend increases should continue.
Ultimately, these attributes may keep retirees safe. Not only does the stock benefit shareholders, but if Cloud’s business is strong, it also increases the chances of the share price rising over time.
