5 Stocks to Keep the Rest of Your Life
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
When I first started trading around age 16, I remember thinking how brilliant I was after reading the first 6 pages of my older brother's economics textbook and skimming 2 or 3 investment articles. This sense of brilliance only multiplied when, after putting about $700 of the $1000 I had to my name into an investment account, my portfolio edged out both the Dow and the Nasdaq. I thought I was going to be the greatest investor in the history of the world.
Over the next year, while the major indices were 3 or 4 percent in the green, my portfolio finished the fiscal year at about 20 percent in the red. One of my stocks had fallen from $72 to $4. Everything that I thought I could do on my own, I couldn't. Plus, trading such small amounts made it hard to come close to a profit with trading fees, regardless of how small they were. I learned that being an active investor at a young age and little disposable income was not as easy as I might have thought.
I decided to give myself another chance, completely liquidating my portfolio and starting over. I picked 5 stocks that I had read about through many different resources, all deemed as good "retirement stocks." I purchased equal amounts of each stock and left the account still for years.
After college, I saw that the account had actually beaten the market. Granted, it was not incredible margins. Yet, I had found a key to one kind of successful investing.
Today, while I now invest actively (and, thankfully, much more successfully than I once did,) I still do keep a retirement portfolio of stocks that I purchased years ago and do not touch. Let me share with you 5 stocks that I believe are well worthy of your portfolio for at least the next fifty years.
First, before giving you the tickers of these long term stocks, let me introduce the criteria I brought into consideration.
Each of the stocks...
...has a dividend; and, more importantly, 4 of the 5 have dividend yields near the "ideal" yield of just over 2% (the yield of the S&P 500.) After all, dividends play a key role in this portfolio: it relies of dividend reinvestment to maximize gains.
...has consistently beaten inflation in the past and, therefore, nearly guarantees to continue doing such.
...has also consistently beaten the market (over time, they had demonstrated the ability to exhibit gains exceeded what the major market indices have demonstrated.
...shows strong management capabilities, especially for the long-term.
...offer products or services that are must-haves (some rely on addiction, others of necessity.)
Wal-Mart Stores, Inc. (NYSE: WMT): Wal-Mart is one of the strongest elements of this portfolio. At 2.2%, it's dividend yield is nearly identical to our benchmark of about 2%. Secondly, Wal-Mart is not only an expert in the essentials, but they do so at unrivaled prices. Additionally, this giant is expanding into new fields such as fresh produce, further entering the grocery market. And, finally, and possibly most importantly, while no one can protest that a 1,391% gain since 1978 (in case you didn't recognize it, we are talking about the S&P 500) but the gains that Wal-mart has posted since the same date seem impossible. Wal-Mart boasts a 102,286% gain since 1978. This means that a $100,000 investment in Wal-mart in 1978 would leave you with well over 100 million dollars today. And this pace doesn't look to be stopping.
Coca-Cola Co (NYSE: KO): Coca Cola has demonstrated throughout the company's history that it has what it takes to be the perfect retirement stock. Once again, it also has proven it's ability to crush the market, posting gains of nearly 5 times the S&P 500. Yet, Coca Cola also relies on the addiction factor that it's sodas bring to the table--an addiction factor that has helped the company thus far an doesn't seem to be stopping any time soon. This stock's dividend yield of 2.7% puts the company a tad above our benchmark, but only slightly (nothing worth worrying about.) All of these elements combine to create a stock that consistently beats both inflation, as well as the market.
Philip Morris International (NYSE: PM): Philip Morris, for those of you don't know, specialize in tobacco products. While I know that this leaves plenty of concerns for a long-term investment, I do have a few remarks to settle your fears. Firstly, cigarettes per capita has grown almost 3,000% since the early 1900s. Secondly, with this change, the cost per package has only increased. Please see the graph from the CDC on the cost per pack of cigarettes over time. (Source: CDC)
The addiction-factor here is easily the most important one: addiction has always been something relied on by the tobacco market and it will continue to be for a lone time. Another reason to count on this tobacco giant lies in the size: Philip Morris is a huge player in this market, owning brands such as Marlboro, Parliament, and Virginia Slims just to name a few. Finally, their dividend yield of 3.5% is a strong one not straying too far from our benchmark.
Procter & Gamble (NYSE: PG): Our fourth stock, Procter and Gamble, is a great example of a perfect dividend stock: a yield of 3.5% is surely nothing to complain about, but here is the impressive part: P&G has an incredible 55-year streak of annual dividend raises. This incredible feat is how this stock made our longterm list. These records suggest that Procter and Gamble only plan on continuing to raise their yield, making this the perfect stock for another fifty years. In addition, the management team at P&G is one of the best in the business, earning the company the honor of being ranked 5th on CNN Money's list of "The World's Most Admired Companies." It has also been ranked 1st in its industry since 1997 on the same list. Annual sales near $79 billion are no small feat either. Each of these attributes combine to make one of the world's strongest longterm companies.
The Walt Disney Company (NYSE: DIS): Disney is a company that, while it has strong long term results, it is notably impressive over the last ten years. Some of the assets of Disney are what makes this company worth buying and keeping: assets like ABC, ESPN, Pixar, and Marvel, four of the biggest companies of the modern media world, are all held by Disney. Additionally, all of the assets with Disney's name on them--the Disney parks, the motion picture assets, the Disney Channel, etc. In addition to this impressive list, the company does post a dividend. While it is only 1.2%, this is not too far off of the benchmark 2% and is still better than some of the stocks making this lists Honorable Mention (such as Mastercard's .3% yield.) Finally, Disney boasts gains of nearly five times the S&P 500 since 1978. This company has all of the components to be a successful longterm holding.
The Foolish Bottom Line
No one can perfectly pick the stocks that will succeed for a long time, but these stocks show many of the promising signs. These five stocks are not designed for income investors--they are more targeted for people willing to let stocks sit in a portfolio for many years. For short-term investments, check out one of The Motley Fool's many articles detailing the best dividend investment portfolios.
Fool blogger Michael Nolan owns shares of Walt Disney and Philip Morris International. The Motley Fool owns shares of Walt Disney and The Coca-Cola Company. Motley Fool newsletter services recommend Philip Morris International, The Coca-Cola Company, The Procter & Gamble Company, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.