Having no savings at 50 does not necessarily mean that retiring early is impossible. However, starting to build a retirement portfolio as soon as possible could be a good idea, since it will provide greater time for compounding to have an impact on your returns.
In addition, investing in companies that could deliver high returns over the long run may prove to be crucial in improving your retirement prospects. With the FTSE 100 currently trading at a low level, now could be a good time to purchase high-quality stocks while they trade on low valuations.
Here are two companies that appear to offer wide margins of safety at the present time. As such, they may improve your retirement prospects.
The recent updates from Taylor Wimpey (LSE: TW) have shown that demand for new homes in the UK has continued to be high, despite a weak consumer environment. The company’s most recent update, for example, showed a record sales rate that could realistically remain high over the long run.
Key drivers of the company’s profitability could include continued low interest rates, as well as favourable government policies towards the wider housing sector. As such, operating conditions for housebuilders such as Taylor Wimpey may be relatively sound.
For investors, the company’s valuation provides a favourable buying opportunity. It trades on a price-to-earnings (P/E) ratio of just 7.5. This suggests that it offers a wide margin of safety, while its strong balance sheet means that it is able to pay a generous level of dividends to its shareholders. In the current year, for example, the stock is forecast to yield over 12%.
Certainly, near-term risks such as Brexit and political fluidity have the potential to cause uncertainty for the company. But with it having a low valuation, it may produce high returns in the long run.
JD Sports Fashion
Another FTSE 100 share that could produce high returns long term is retailer JD Sports Fashion (LSE: JD). Its recent updates have shown that it has delivered impressive sales and profit growth despite wider consumer weakness in the UK.
Of course, the company’s international growth prospects mean that it may become less reliant on the UK market in the years ahead, which seems like good news. Its business model seems to be highly effective in a wide variety of regions, which could provide it with significant scope to expand globally.
JD Sports Fashion is expected to post a rise in its bottom line of 16% in the current year, followed by additional growth of 13% next year. Since it trades on a price-to-earnings growth (PEG) ratio of 1.5, it seems to offer capital growth potential – especially when compared to the wider FTSE 100 retail sector. Furthermore, its growth in non-UK markets may reduce its overall risk, thereby improving its investment potential yet further.
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Peter Stephens owns shares of Taylor Wimpey. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.