Passive income and more effective risk management are the name of the game when it comes to closing in on your retirement years. Undoubtedly, growth may take a backseat to some of the less-choppy, secure dividend stocks. However, just because you have a preference for passive income plays does not mean you need to say goodbye to the high-growth stocks that have helped your retirement nest egg swell over the years and decades.
Higher yields don’t necessarily have to come at the cost of long-term growth and appreciation. Though having higher dividend commitments does take a bit away from cash flow that could have been put to work on future growth drivers, there are some firms with economic moats wide enough such that they can pay juicy (and growing) dividends as well as funding a steady single-digit growth profile.
Easy Passive Income Options to Dip a Toe Into the Retirement Waters
Just because you’re retired or close to being, it does not mean you can’t participate in the so-called AI-driven industrial revolution. Undoubtedly, there are inherent risks in betting on AI stocks at these levels. Though some of the froth and hype has been wiped out since late summer, it’s important to realize that you’ll need to put up with rampant volatility if you’re to have a shot at next-level growth provided by the AI trade. Further, your retirement could span a number of decades, especially if you’re opting to ease into a semi-retirement lifestyle in your 40s or 50s.
Suppose you’re a semi-retiree who’s on the younger side. In that case, it may make some sense to add some growth spice to your portfolio, provided you understand the risks you’ll bear over securities overweighted in more traditional retirement portfolios (think fixed-income investments and lower-beta defensive dividend stocks).
In this piece, we’ll check out one dividend stock and one high-yield exchange-traded fund (ETF) that are easy additions to any passive income-focused portfolio built for one’s golden years.
Vanguard High Dividend Yield ETF: Set it, Then Forget it.
Vanguard High Dividend Yield ETF (NYSEARCA:VYM | VYM Price Prediction) is an easier way for retirees to bet on a wide range of solid dividend-paying companies. With a dirt-cheap expense ratio of 0.06% and one of the most compelling mix of holdings (chip giant Broadcom (NASDAQ:AVGO), a name I previously referred to as a top buy-the-dip AI stock, is actually the largest holding right now) that span several industries, the VYM is about all you’ll need if you seek passive income and a good mix of growth.
At writing, the VYM ETF yields 2.83%, which, while not massive, is pretty impressive considering the capital gains potential of the basket of stocks. Over the past 10 years, the VYM has risen 10.21% annually, far less than the S&P 500 (13.38%). That said, with less market risk and choppiness (0.77 beta), look for the ETF to hold up on particularly bad days for markets.
Qualcomm: An AI Stock With a Growing 2% Dividend Yield
At current levels, Qualcomm (NASDAQ:QCOM) looks to offer an intriguing value proposition while it’s in the midst of a bear market. At its worst, QCOM stock shed close to 32% of its value between June and August. Shares have recovered modestly but are still 23% off their peak.
The semiconductor firm has often overlooked and discounted AI exposure. And though the AI trade could skyrocket or crumble based on a single firm’s reported quarterly results and guidance, QCOM shares do look pretty modestly valued as far as AI companies come.
At writing, the stock goes for 22 times trailing price-to-earnings (P/E) or 15 times forward P/E. That’s absurdly cheap for a company playing a big role in pushing “edge AI” (on-device AI) to the mainstream. As the company doubles down on its Snapdragon X Elite chip to make the most of an AI PC boom while exploring growth from mixed reality hardware, Qualcomm has plenty of options to pole vault over the bar in the new year.
Just last month, the firm released its all-new eight-core PC processor, the Snapdragon X Plus, which could give the ailing Intel (NASDAQ:INTC) a serious run for its money in the CPU market.
Despite the impressive AI-driven growth drivers, Qualcomm has a solid 1.9%-yield dividend, which also stands to grow at an above-average rate if Qualcomm’s new chips find success in the lucrative edge AI market.
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