Retiring in comfort earlier than expected is far from common. For most people, this is nothing more than a pipe dream. Nevertheless, countless prudent savers and savvy investors do escape the rat race every year.
Much of their success boils down to some combination of lucrative professions and a lifetime of thrifty spending habits. However, another key ingredient for an early retirement is savvy investments.
I believe investors trying to reach a certain milestone earlier than the average saver need to pick stocks that offer either a higher-than-average rate of current income or future growth. Growth stocks can help savers accumulate a larger asset base to retire later, while high-yield dividend stocks can help retirees with smaller nest eggs maximise their cash flows right away.
With that in mind, here are two FTSE 100 stocks I believe fit the bill perfectly.
Ocado Group’s (LSE: OCDO) growth prospects and market potential are unimaginably vast. The company estimates that the global food distribution market is worth £5.6trn, much of which is devoted to warehousing and last-mile delivery.
Not only is this a multi-trillion dollar market, but it is also expanding rapidly. Global grocery retail is expected to expand by another £2.7 trillion by 2022, according to the Institute of Grocery Distribution (IGD).
Ocado is a clear leader in this space. The company has a proven track-record and has established brand awareness. This puts it ahead of the competition and should allow it to expand at its current double-digit percentage pace.
Revenue expanded by 10.3% between 2017 and 2018. In its most recent quarter, sales and average orders per week were both up 11% and 12% year-on-year. This growth rate is a reflection of the company’s transition from a pure online grocery chain to warehouse automation technology giant.
And today it announced another step forward with news of a deal with Japanese retail giant Aeon to develop Aeon’s online domestic grocery business using the Ocado Smart Platform.
In short Ocado has the right strategy and plenty of room to offer substantial growth over the long term, helping young investors move closer to early retirement.
At the other end of the growth spectrum is Phoenix (LSE: PHNX) . The company offers no cutting-edge technology or hyper-growth prospects. Instead, it focuses on the arguably boring business of managing books of closed life insurance policies and pensions assets.
My Fool colleague Rupert Hargreaves went into great detail to explain how this company’s business model works. In short, this is an insurance company that writes policies and also acquires policies from other firms to generate consistent cash flow.
While the business is boring, it’s incredibly lucrative. Phoenix has 10m policies and £245bn of assets under administration. The robust cash flows from these assets allow the team to offer shareholders substantial dividends.
At the current market price, Phoenix shares offer a 6.2% dividend yield. That’s more than a third higher than the FTSE 100’s average yield of 4.5%. That dividend yield is enough to generate the UK median household disposable income with just £475,000 in capital.
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VisheshR has no position in any of the shares mentioned. 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.
Motley Fool UK 2019