Retiring early has become a pipe dream for many Americans. But luckily, early retirement is a lot closer than it looks if you can save and plan ahead. The key is to invest strategically in high growth investments, to increase your savings while creating reliable passive income streams.
Two stocks that both offer lucrative opportunities are Airbnb (ABNB -0.16%) and Home deposit (HIGH DEFINITION -1.17%). Here’s a closer look at each company and why these actions might help you prepare for successful early retirement.
1.Airbnb
Airbnb has grown significantly since its humble beginnings in 2007. The vacation rental listings platform is now the largest in the world, with more than 6 million active rental listings in more than 220 countries. And the company still has plenty of room to continue growing.
Since its IPO in early 2021, Airbnb has increased its positive free cash flow by more than 500% and increased its operating margin by 138%. Generating such a healthy profit as a young company is quite rare in the world of high-growth tech companies. 2022 was a good year for Airbnb as travel demand soared after COVID-19 travel restrictions eased.
In the third quarter of 2022, nightly bookings increased by 25%, while higher average daily rates (ADRs) allowed the gross value of bookings to jump by 31% compared to last year. The company also had its most profitable quarter ever, with net income of $1.2 billion. Yet Airbnb is still down 37% since its IPO. Part of that is bad timing, as the overall market is in bearish territory, but another part is worry about the impact of a recession on travel spending.
A recession could certainly dampen short-term growth, but I don’t think it would put Airbnb out of the running for achieving incredible growth over the next 10-20 years. The shares are very good price today and trading near their 52-week low, which right now makes the perfect time to buy this high-growth stock.
2. Home Depot
Airbnb offers investors a great opportunity for growth, but retiring early is also about having enough passive income to cover your monthly living expenses. This is where Home Depot comes in.
Being the largest home improvement store in the world makes it harder to achieve double-digit annual growth. Instead, the company realizes a steady increase in revenue and earnings per share every year, and its dividend yield is now above 2.3% – better than that of the S&P500.
Like Airbnb, Home Depot has benefited over the past few years thanks to a housing market boom fueled by COVID-19. Demand for home renovations skyrocketed as people made improvements to their properties during self-isolation and lockdowns. The company’s revenue is returning to more normalized levels of growth as we approach 2023, but that’s not a bad thing. This means that investors must be able to rely on dividend income for the coming years.
Home Depot has increased its dividend by 700% since 2010 in 12 years of consecutive increases. It is unlikely to cut the dividend in the near future, although a recession and inflationary pressures continue to weigh on the company, thanks to its conservative payout ratio of 44%.
His price/earnings ratio of 19 is slightly lower than its nearest competitor, Lowe’s — and a fair valuation given the company’s size, sound balance sheet and track record of growth.
Liz Brumer Smith has positions in Airbnb. The Motley Fool fills positions and recommends Airbnb and Home Depot. The Motley Fool recommends Lowe’s. The Motley Fool has a disclosure policy.
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