For most people, retiring early is a major goal in life. Investing in shares can help you to achieve that, but these three stocks could help you to do so a few years earlier than you expected.
AstraZeneca (LSE: AZN) has endured a challenging period due to its loss of patents on key, blockbuster drugs in recent years. This has caused a large fall in profitability, which has hurt investor sentiment to a degree. However, this weakening of investor sentiment has been more than offset by optimism towards AstraZeneca’s acquisition strategy. The company has made full use of its strong cash flow and sound finances to transform its pipeline so that it’s now all set to deliver positive growth over the medium-to-long term.
Allied to this is AstraZeneca’s income potential. It currently yields 4.1% and with dividends being covered 1.5 times, they’re very sustainable. This mix of income return plus the potential for strong growth from its new pipeline of treatments means that AstraZeneca could soar over the long run and help you retire early.
One thing that’s of great benefit to long-term investors is consistency. On this front, Compass (LSE: CPG) has huge appeal since it has an excellent track record of earnings growth. In fact, over the last five years its bottom line has increased in each year, with an annualised earnings growth rate of 8.3% during the period. This bodes well for its future returns, since it shows that it can operate in a range of economic conditions and still turn a rising profit.
The food services industry provides Compass with a relatively dependable financial outlook. That’s because demand is quite resilient and with the outlook for the UK economy being uncertain due in part to Brexit, this could cause investor sentiment towards Compass to improve. Its yield of 2.2% may be lower than the FTSE 100’s yield of 3.5%, but with dividends being covered 1.9 times by profit, there’s scope for shareholder payouts to rise by at least as much as profit over the long run.
Although the UK retail sector faces an uncertain future, Sainsbury’s (LSE: SBRY) has the right strategy to perform well. Its pricing is simple and focuses on offering value for money rather than chasing low prices, while its acquisition of Argos owner Home Retail provides growth potential. The synergies between the two companies are significant and there are major cross-selling opportunities that could boost Sainsbury’s bottom line over the medium-to-long term.
Sainsbury’s yields 4.4% at the present time and its dividends are covered twice by profit. While dividend growth may be somewhat low in the near term due to the uncertain operating environment it faces, Sainsbury’s has significant headroom when making dividend payments and this could lead to a rapidly rising income return over the coming years. Therefore, it offers excellent total return potential and alongside Compass and AstraZeneca, could help you retire early.
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Peter Stephens owns shares of AstraZeneca and Sainsbury (J). The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.