You picked a heckuva time to make your first investments in the stock market. The S&P 500 has lost 13% of its value so far this year, and the Nasdaq Composite index is down over 19%.
We’ve had two consecutive quarters of economic contraction, interest rates are rising, the housing market is suddenly slowing, inflation is soaring, and energy prices, while down sharply from last month, are still extraordinarily high.
And you say now is when you want to put your money to work?
Well, it’s actually a great time to start investing! Growth stocks that were exorbitantly priced are now affordable once more. It’s why seasoned market veterans begin rubbing their hands together when the market tumbles: It’s when you can create substantial wealth for yourself because you’re buying low with the goal of selling much higher in the years to come.
It’s true the market could fall a lot more in the months and quarters to come, so only invest money you don’t need to pay your bills and continuously add to your account on a regular basis. If you’ve got those basics down, then these two growth stocks could be great ways to start off.
Real estate investment trust Realty Income (O 0.05%) might seem like a complex first choice, but the REIT is pretty straightforward, and one of the best in the business.
Like all REITs, Realty Income is required to pay out 90% or more of its profits to shareholders in the form of a dividend, an attractive feature during a recession since the steady income stream helps offset the lack of capital appreciation, which could be hard to come by. And Realty Income goes one better by making its payout monthly.
In fact, the commercial REIT bills itself as “The Monthly Dividend Company”, and its payout is one of the safest, most secure, and dependable in the industry. In the 53 years since Realty Income was founded, it has made 625 consecutive monthly dividend payments, and has hiked its dividend for 99 straight quarters, or almost 25 years. The dividend currently yields an attractive 4.1% annually.
Commercial real estate can certainly be dicey, but Realty Income is built on long-term leases — the average is 10.3 years — which smooths out any rough spots, and it boasts solid, financially stable tenants across 50 different industries. Over half of them are investment-grade, and they tend to be recession-resistant businesses, such as discount stores, drugstores, and supermarkets. They are also responsible for taxes, maintenance, and insurance, and no single company accounts for 10% or more of the REIT’s revenue.
Given its track record and stability, Realty Income is a solid choice for new investors looking for stable growth.
Walgreens Boots Alliance
Pharmacy chain Walgreens Boots Alliance (WBA 1.13%) might also appear an odd choice for a new investor entering the market, but this is not the same company it was just a few years ago.
Walgreens is in the midst of a turnaround program that is seeing the chain cut costs, strengthen its balance sheet, drive steady organic growth, and further bolster its Walgreens Health initiative to draw repeat business. It also recently considered shedding its U.K.-based Boots pharmacy chain (and a beauty care products business) to focus more directly on its U.S. healthcare operations, but ultimately decided it wouldn’t get the price it wanted. The market sent Walgreens stock down at the time, but investors should be thankful.
Boots and No7 Beauty are actually growing businesses. Boots’ comparable retail sales jumped 24% last quarter, and though its pharmacy comps were down 0.4%, that was because of a one-time reimbursement from the U.K.’s National Health Service in the year-ago period. Similarly, No7 continues to gain market share.
Walgreens has invested heavily in its digital presence, and that’s paying off, too. Digital sales were up 25% from last year, a period which saw 95% growth, and its myWalgreens membership is approaching 100 million customers.
Walgreens has been able to reduce costs by $2 billion a full year ahead of schedule even as it invests in its future, with initiatives such as its full-service health clinics at its pharmacies. What differentiates them from other pharmacy clinics is they are staffed by physicians, which should increase customer loyalty while driving return visits to its stores.
Walgreens stock is cheap, going for six times trailing earnings, less than nine times next year’s estimates, and just a fraction of its revenue. Its dividend, which it has paid for 89 years (and raised for 47 straight years, making it a Dividend Aristocrat), yields 4.9%.
With shares down almost 30% from their recent high, Walgreens Boots Alliance offers new investors a great value if they’re willing to have the patience to let the turnaround work.