The Best Stocks to Invest $50,000 in Right Now – The Motley Fool
Posted: December 12, 2022 at 12:28 am
Investors should always remain aware of their risk tolerance, which becomes increasingly important as your position sizes grow and the stakes become larger. You might invest $500 differently than, say, $50,000.
But you don't have to completely ignore the investment strategy that got you to that point; you can invest to grow your wealth while minimizing the risk of severe volatility. Finding the highest quality stocks should be your goal, and here are some great stocks to consider, especially for those with large position sizes.
Technology conglomerate Alphabet (GOOG -0.94%) (GOOGL -0.94%) dominates the internet; its Google search engine conducts 92% of the world's internet searches, a fantastic stat because it shows that no company on earth has been able to set up a notable competitor in any market. It's about as close to a monopoly as you can get. Additionally, its video platform YouTube has become one of the world's largest media sources; it's the world's second-most-visited website, just behind Google.
Alphabet generates tons of profitable revenue by selling ads to its internet audience; the company's done $282 billion in revenue over the past year, and $62 billion of that (22%) becomes free cash flow, profits that Alphabet can add to its financial war chest. The company holds $116 billion in cash against just $12 billion in debt. Finding such a large and dominant business with robust financials is hard.
GOOG Revenue (TTM) data by YCharts.
Investors can feel confident putting their money into such a steady company. Plus, it's not like Alphabet can't keep growing; analysts believe the company's earnings-per-share (EPS) will increase by an average of 11% annually over the next three to five years. Shares are down 37% from their high in this bear market, its largest drawdown ever. That seems like a great buying opportunity for one of Wall Street's most fundamentally solid stocks.
Investing $50,000 into a dividend stock can produce some solid dividend streams, and telecom giant AT&T (T -0.16%) is an excellent option for maximizing your passive income. AT&T is the largest wireless carrier in the United States, with approximately 45% market share. The company's financials have improved dramatically since it shed its entertainment business to focus solely on telecom. The company's dividend yields 5.8% at the current share price.
T Payout Ratio data by YCharts.
AT&T is a former Dividend Aristocrat; it cut its dividend as part of its restructuring to free up more cash to pay down debt. This has provided a lot of relief to AT&T's financials, which should ensure a more reliable dividend moving forward. The current dividend payout ratio is more manageable at 58% of earnings,and AT&T's dividend should only become safer as the balance sheet sheds debt. AT&T's telecom business should also remain reliable in a recession. Most consumers pay their phone bills like a utility because of how much a smartphone does nowadays (social media, bills, banking, etc.).
AT&T's wireless business is picking up new customers at a healthy rate in 2022, which could be another clue that AT&T's business is trending upward. Analysts believe the company's EPS will grow by an average of 3% annually over the next three to five years. That won't impress your friends, but you don't need a lot of growth for AT&T to keep raising its dividend.
Global semiconductor company Texas Instruments (TXN -1.19%) makes analog chips that go into countless electronic devices. It's the world's leading analog chip supplier, with approximately 19% of the market in 2021. That translates to revenue totaling just over $20 billion over the past four quarters. Additionally, Texas Instruments is very profitable; about $0.29 of every revenue dollar ends up as free cash flow.
The company's strong margins have made Texas Instruments an excellent dividend stock; investors can get a 2.8% dividend yield today, and management has increased the payout for 19 consecutive years. The dividend payout ratio is 47%, which leaves plenty of room for growth for this (potential) eventual Dividend Aristocrat.
TXN Revenue (TTM) data by YCharts.
Semiconductors are the building blocks of technology, so chips should remain in demand as new technology like autonomous vehicles, the Internet of Things (IoT), and automation continue growing over the coming years. These opportunities should translate to growth for Texas Instruments; analysts are looking for EPS growth averaging 9% annually over the next three to five years. The stock has held up well in 2022, down just 14% from its high. But at a price-to-earnings ratio (P/E) of 18, the stock is still cheap compared to its median P/E over the last decade of 21.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Texas Instruments. The Motley Fool has a disclosure policy.
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The Best Stocks to Invest $50,000 in Right Now - The Motley Fool
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