How J Sainsbury plc Could Help You Retire Early
As my fellow Fools are all too aware, there are a large number of risks in investing.
However, one risk that hasn't been discussed in a large amount of detail in recent years is interest rate risk. This is the risk to companies (and, therefore, investors) from a change in interest rates and, since rates are at 0.5%, the risk appears to be from a rising rate rather than a falling one.
Of course, there has been a vast amount of discussion on when interest rates will go up but not too much on what could happen when they do.
One possible effect of rising interest rates could be to heap pressure on heavily indebted companies, with the interest rate they pay on debt increasing and leaving them with reduced levels of profitability. In extreme cases, companies with too much debt could find themselves struggling to service their debt and this could lead to a very rough ride for shareholders.
Fortunately, one company that should successfully navigate the inevitable rise in interest rates is J Sainsbury (LSE: SBRY) (NASDAQOTH: JSAIY.US). It has a relatively low level of debt, with its debt to equity ratio standing at just 48%, meaning that for every £1 of net assets owned by the company, it has 48p of debt.
Indeed, judging by the way it is conservatively financed, J Sainsbury appears to be a company that will still be around upon your retirement. This means that it could help to bring that day one step closer.
Furthermore, J Sainsbury continues to invest for the future, with capital expenditure being considerable in each of the last five years. Although this inevitably reduces free cash flow (meaning there is less cash available to distribute to shareholders) it also means that J Sainsbury is focused on building a strong, long term future.
Clearly, management are not solely focused on squeezing out as much profit as they can in the short run, which could be to the detriment of the future prosperity of the business. Instead, they are investing in a business that has every chance of still being around upon your retirement, hopefully making it come sooner rather than later.
On that theme, here are 5 Stocks You Can Retire On.
They have been researched by the team at The Motley Fool and contain a great mix of income so as to offset the pressure you're probably feeling from inflation and low bank account savings rates, as well as growth prospects that could be higher than other stocks you currently hold in your portfolio.
The report is free and without obligation - click here to retire early!