It’s been a day for great earnings news here at Rich Retirement Letter.
As my colleague J-Rod and I often say, earnings season is like having Christmas four times a year! Every quarter, we enjoy a special period where we hear from the companies we’re invested in.
Quarterly earnings reports give us a snapshot of how much profit companies have generated, what kind of dividends these firms will pay, and most importantly what management expects for the months to come.
These reports help us understand whether our plays are still in good shape and the opportunities the companies are pursuing.
And they also give us a chance to evaluate whether we want to stick with these investments, add more shares, or possibly take profits off the table.
Today, I want to highlight three key companies that have reported earnings this week.
We’ll cover how these companies are doing. We’ll also take a look at what their earnings reports tell us about their respective industries. And we’ll draw some conclusions about the health of our economy.
As we review the earnings reports, I hope that you’ll consider adding one or more of these names to your retirement account.
Let’s get started!
Reinstating Guidance and Building Confidence
The first Retirement Champ we’re covering today is 3M Co. (MMM).
This company has been on the frontlines of the coronavirus battle, supplying personal protection equipment like N-95 masks and respirator equipment.
MMM earned $2.38 per share for the fourth quarter, which is up more than 40% from the year before.
The results also came in above what most Wall Street experts expected, helping to drive shares of MMM higher this morning.
The exciting thing for MMM investors is that the company didn’t just excel because of its medical business lines. Home improvement, general cleaning, consumer electronics and office supplies also contributed to helping the company grow profits.
I was particularly pleased to see that MMM’s management reinstated guidance for the rest of the year. Executives believe that MMM will earn between $9.20 and $9.70 per share in profits this year. The guidance is slightly above where most Wall Street analysts projected.
By offering guidance for the year ahead, MMM’s management is signaling to the market that their business is stable, that growth will continue and that investors can rest easy knowing that the company will continue to generate reliable profits.
That’s exactly what we want to see from our retirement investments. Stocks like this help us grow our wealth and sleep well at night not worrying about turbulent swings due to business uncertainty.
If you buy shares of MMM today, you’ll be locking in a 3.4% dividend yield — which is quite attractive in this market.
Plus, the company continues to generate profits well above what it pays to investors each year. And that means there’s room for your dividend payments to increase over time.
In short, this looks like a great report from MMM and it makes me more confident that this stock will continue to be a great play to fund your retirement.
An Earnings Beat With Reopening Prospects
Our second Retirement Champ for today is Johnson & Johnson (JNJ).
JNJ reported earnings of $1.86 per share for the fourth quarter, which was better than the $1.82 investors expected.
More importantly, the company’s management told investors to expect key details on its coronavirus vaccine to come out soon.
This comment sounds very promising, since management would likely have less to say about this opportunity if the data wasn’t looking positive.
Aside from the potential for another vaccine in play, I’m excited about JNJ because of the reopening prospects for the company’s other business lines.
In particular, JNJ’s medical device unit could see sharply higher sales this year as patients decide to go back to clinics and hospitals to have elective surgeries.
For the last year, patients have been avoiding hospitals and other healthcare facilities at all costs to avoid the risk of contracting COVID-19.
I have a family member in need of a hip replacement who has been living in pain rather than risking contracting the virus while getting the procedure done.
Once the vaccines begin to reduce the risk of patients contracting the virus, we’ll see a reopening in hospitals and surgery centers for procedures like this. And that reopening should help drive sales in other areas of JNJ’s business.
The news today sent shares of JNJ to a new all-time high. So if you currently own JNJ as a retirement investment, congratulations!
Even if you buy at today’s higher price, you’ll still get about a 2.4% dividend yield from your investment.
And with JNJ’s profits likely to grow in the year ahead, I wouldn’t be at all surprised to see the company’s dividend increase by a material amount this year.
Consider adding this name to your investment account if you’re not already a shareholder!
This 5G Play Continues to Grow
Finally, I wanted to highlight shares of Verizon Communications Inc. (VZ) after the company reported earnings this week.
VZ reported earnings of $1.21 per share, which was slightly above what Wall Street analysts expected.
Verizon also told investors to expect the company to earn between $5.00 and $5.15 per share in the coming year, which was also above the number that Wall Street’s researchers had pegged.
Shares of VZ moved a bit lower following the announcement. But it’s important to realize that the stock actually had a very strong day on Monday leading up to the announcement.
So shares are now trading basically in-line with where the stock closed last week.
If there’s anything to complain about with VZ’s earnings report, it’s the fact that the company added fewer wireless customers than some investors expected.
Still, the rollout of Verizon’s 5G network will not only help VZ enroll more customers, it’ll also help VZ charge more for each customer that taps into this high-speed network.
So the future is still very bright for VZ. And the stock still looks very attractive as a retirement investment!
After all, VZ still pays a quarterly dividend of $0.628 per share, adding up to a 4.4% yield. That’s a great level of income for today.
And since VZ’s profits per share continue to be well above the dividend payout, we can be confident that VZ’s payouts will continue to grow for years to come.
So as we work our way through this earnings season, I’m very happy with how many of our retirement plays are faring.
I hope you’re continuing to generate great profits from your investments. And I would love to hear what plays are working out best for you!