P&G, Starbucks: Great Retirement Stocks, But Is Now A Good Time To Buy?

P&G price chart

Dividend stocks, in general, have had a great rally in the first half of this year. Investors have flocked to high-quality income names as they sought shelter amid widespread warnings of imminent recession or economic slowdown.

Though that danger is still lurking large, the gains of the first half have made many popular dividend stocks expensive to buy if you’re starting to build your retirement portfolio. These are the two top names to consider buying when the next dip comes:

1. Procter & Gamble

Procter & Gamble Company (NYSE:) is one of those dividend stocks that retirees love. The world’s biggest consumer product company is also one of the largest dividend payers in the sector.

The maker of Dawn dish soap and Pampers has hiked its dividend for 62 consecutive years. Over the past 128 years it has paying dividends, making even during recessions, wars and droughts.

But if you want to add this stock to your portfolio now, the timing may not be right. After surging more than 22% on a total returns basis since January, P&G’s valuations don’t look quite so compelling. The consumer staple giant’s 2.7% dividend yield is much lower than its four-year average of 3.4%, while its price-to-earnings multiple of 26.52 is getting close to the highest in five years.

That being said, some analysts still see a lot of value in PG stock. Goldman Sachs, last week, upgraded the giant, saying the stock still offers a “potential double-digit return” opportunity.

“We believe there is a role in investors’ portfolios for a large liquid global staples company such as this and note that PG remains the most underweight U.S. listed mega-cap global consumer packaged goods company among mutual funds,” Goldman said in a note to clients.

The investment bank boosted its rating to “buy” from “neutral,” and also raised its 12-month target price to $125 a share. P&G closed around $111.49 yesterday after rising 0.9%

2. Starbucks

Investor enthusiasm about Starbucks Corporation (NASDAQ:) doesn’t look like it’ll die down anytime soon. The maker of popular Frappuccinos and pumpkin-spiced lattes hit another record high yesterday after jumping more than 70% in the past one year, gaining around 1.1% through the session to close at $85.51.

This powerful momentum is being fueled by the company’s upbeat forecast for 2019 coupled with that its turnaround efforts are being effective. For the quarter that ended in March, the world’s largest coffee-chain numbers that came in much stronger than the market expectations.

Starbucks price chart

This performance is extraordinary for a mature restaurant operator in an environment where costs are escalating, competition is intensifying, and consumers are seeking healthier options than sugary Frappuccinos.

Starbucks’ powerful comeback this year shows that the chain is winning back coffee-drinkers — not only in its home markets, but also in China, a country that’s taken center stage in the company’s growth strategy. Indeed, its further expansion is very much dependent on international success as well as restructuring at home, which is crucial to meet customers’ changing needs.

If you don’t own Starbucks already, this may not be the right time to start building a position. But If this stock goes through a pullback for whatever reason, you shouldn’t hesitate to start buying it. Starbucks is an attractive buy-and-hold candidate for retirees, especially with its hefty dividend growth, that’s currently yielding just 1.72%, and a share buyback plan.

Bottom Line

Both P&G and Starbucks are dependable consumer staple companies which fit perfectly in any retirement portfolio aimed at generating passive income during the golden years. Retirees can rely on them in both good and bad times. Both companies have a wide moat, recurring cash flows and a history of rewarding their investors.

If you’ve bought these stocks, there’s no reason to panic and sell. If you’re a new investor, it would be better to wait on the sidelines after their massive jump this year. They should be on your shopping list when the next opportunity comes along.

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