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All Contents © 2019The Kiplinger Washington Editors
By Charles Sizemore
| February 24, 2017
Forever is a long time to hold a stock. Most investors hold on to a stock for less time than the late Elizabeth Taylor held on to a husband. Depending on who you ask, the average holding period for a stock has been estimated as anywhere from 11 seconds to five days.
And it’s not just traders doing the churning. Even the index creators seem to be doing a Wall Street version of speed dating at times. Of the 12 stocks that made up the original Dow Jones Industrial Average in 1896, the General Electric Company (GE) is the only one still in the index. And even General Electric was briefly kicked to the curb in the early 1900s.
Yet overtrading can be an investor’s worst enemy, as every dollar you spend in trading commissions is a dollar that is no longer compounding and working for you. And there are some stocks that are worth holding on to — forever. If a stock is healthy, growing and ideally throwing off a decent dividend, there’s no real reason to dump it.
So today, we’re going to take a look at 10 of the best stocks to buy and hold forever.
You’ll notice something about this list of best stocks: It’s pretty lean on technology companies, and there’s a good reason for that. Technology is inherently disruptive and also prone to being disrupted itself. Today’s tech leaders will likely not be in business a few decades from now. For a list of stocks to buy and hold forever, we’re looking for boring, consistent models that have withstood the test of time.
Prices and data are from the original InvestorPlace story published on February 16, 2017. Click on ticker-symbol links in each slide for current prices and more.
This slide show is from InvestorPlace, not the Kiplinger editorial staff.
Dividend yield: 3.2%
Long-Term growth: 12.1%
I mentioned General Electric earlier, and I figure it’s a good stock to start with. GE is a leading American industrial conglomerate that has clearly stood the test of time. It was an original Dow component over a century ago, and it will likely still be around a century from now.
Though for a while, that might have been a dubious statement. Back in 2008, during the pits of the financial crisis, GE had to go to Warren Buffett begging for money. GE’s financial arm, like virtually every bank out there, had gotten in over its head. And GE Capital had grown to the point that GE looked more like a mammoth hedge fund than an engineering company.
Thankfully, that has changed. GE has spent the better part of the past decade winding down its financial operations, and GE was recently removed from the list of “systematically important financial institutions.” It took time, but GE finally looks like a real industrial company again, and a leading producer of everything from aircraft engines to medical devices.
GE isn’t exceptionally cheap right now (few stocks are in this market), but if you’re looking at a holding period of forever, then buying at today’s prices isn’t unreasonable. GE sports a respectable 3.2% dividend.
Dividend yield: 3.8%
Long-Term growth: 9.6%
Unless Islamic State really does conquer the world and turn us all into teetotalers, I’d say it’s safe to assume that we’ll still be consuming alcohol a century from now. We all know what the world’s oldest profession is, but I’d argue that distilling booze is probably mankind’s second oldest profession.
And this brings me to global drinks giant Diageo plc. Diageo is about as close to technology proof as you’re going to get. At the end of the day, the process of fermentation really doesn’t change.
Tastes change, of course, but Diageo’s brands span across virtually all tastes and preferences. It owns the popular Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray and Guinness brands, among others, and its portfolio is always expanding.
Diageo isn’t cheap at current prices, trading for 25 times earnings. But if you’re looking for a stock that is likely to be around decades or even centuries from now, this is it.
Dividend yield: 3.7%
Long-Term growth: 6.7%
Along the same lines, I’d recommend Anheuser Busch InBev NV, the world’s largest beer brewer. This might seem like an odd choice given that some of BUD’s most iconic brands, such as Bud Light, appear to be in terminal decline as drinkers switch to more full-flavored craft beers. After all, it’s not uncommon to visit a bar in Dallas and find 17 different local craft beers on tap and not a single national brand like Bud or Miller.
But let’s not forget that this is a company that has successfully changed with the times in the past and will likely continue to do so in the future. Bud Light was itself a reaction to changing consumer tastes in the early 1980s, and its launch made beer more palatable to women drinkers at the time.
This time around, BUD is responding to consumer tastes by buying a portfolio of craft beer names. And decades from now, when consumer tastes inevitably shift again, BUD will no doubt change with the times.
BUD is a stock you can safely buy and hold forever.
Dividend yield: 4.2%
Long-Term growth: 5%
If any stock can ever claim to be “future-proof,” it would be the Monthly Dividend Company, triple-net retail REIT Realty Income Corp.
It might seem odd including a retail stock on a list of best stocks to buy and hold forever. Internet commerce continues to eat into brick-and-mortar retail more and more with every passing year, and it’s not unreasonable to expect a major wave of retail bankruptcies at some point.
Well, all of that may be true, but I’m not concerned about Realty Income. Its property portfolio is made up mostly of high-traffic retail stores that are critical to daily life. Your local Walgreens Boots Alliance Inc. (WBA) or CVS Health Corp. (CVS) pharmacy is a good example of the “typical” Realty Income property.
I consider O to be one of the safest stocks you can buy. It’s bond-like in its predictability but actually a lot better than a bond. Bonds pay a fixed coupon twice per year, but Realty Income pays its dividend monthly, which better aligns your income with your expenses. Dividends also are taxed at a more favorable rate than bond interest.
But even better, Realty Income actually raises its dividend … and raises it often. O stock has raised its dividend for 77 consecutive quarters and counting.
Dividend yield: 2.7%
Long-Term growth: 5.9%
It doesn’t get much more boring than Band-Aids. A century from now, unless Doctor McCoy’s Star Trek tricorder becomes a reality, we’re still going to need them, and Johnson & Johnson will still be there to sell them.
Johnson & Johnson is going to be a mainstay on any list of best stocks to buy and hold forever. Most of its products are consumed and disposed, meaning you regularly have to come back for more. And naturally, JNJ is more than just cheap gauze and Band-Aids. It has successful medical device and pharmaceutical businesses as well.
But one nice aspect of all of JNJ’s businesses is that none are particularly sensitive to the economy. JNJ is one of the most defensive stocks out there, and one of only two AAA-rated companies left in America.
Johnson & Johnson is a dividend-hiking machine, having raised its dividend for 54 consecutive years and counting. And I’m betting it will still be churning out that dividend a century from now.
Dividend yield: N/A
Long-Term growth: 8.8%
Berkshire Hathaway Inc. might be a peculiar stock to add to a list of stocks to buy forever. After all, Warren Buffett is getting up there in years, and he won’t be running the company for much longer unless we find a way to clone him. (I’m keeping my fingers crossed!)
Alas, I don’t see that as being likely. The truth is, we have to get used to the idea of a Berkshire without Buffett.
That’s OK. The empire that Buffett built is a durable one that will be around long after the Oracle has left us. Buffett has almost always eschewed technology companies (with his purchase of IBM being a glaring and unfortunate exception) because they are prone to disruption. Most of Berkshire’s portfolio is full of boring, old-line business like consumer staples and insurance. Berkshire Hathaway also has interests in trains and utilities and in niche businesses like Nebraska Furniture Mart and See’s Candies.
Nothing about Buffett’s empire is interesting. It’s as boring as Buffett’s home state of Nebraska itself. And that’s exactly why I like Berkshire and consider it a safe stock to buy and hold forever.
Dividend yield:: 2.9%
Long-Term growth: : 7.5%
Next up is a stock that was previously one of Berkshire Hathaway’s larger holdings: consumer staples giant Procter & Gamble Co.
PG is an interesting study in business models. One of Buffett’s reasons for liking its Gillette brand was its predictability. Men would buy a razor and then be lifetime customers buying the expensive blades.
Well, then a funny thing happened. We had the birth of the hipster beard and a revival of old-school safety razors and straight razors… a flood of cheap interest competitors. So suddenly, razor sales are no longer as predictable. But that’s precisely why Procter & Gamble’s is such a great company. It owns 21 brands that each do over $1 billion in annual sales, so a setback like this in men’s razors is something that can be taken in stride.
Procter & Gamble has raised its dividend for over six decades. That’s about as dependable as you can get and yet another reason why Procter & Gamble is a company you can safely buy and hold forever.
Long-Term growth: 8.4%
Next up is Swiss confectionery giant Nestlé SA. Nestlé’s business is easy to understand. It sells food and nutrition products, including everything from baby formula and chocolate milk to packaged food and instant coffee … including my beloved Nespresso machine. These tend to be recession-proof products as well as future-proof products. No matter how humans might evolve in the decades to come, I expect they will still be drinking their morning coffee a century from now.
Nestlé has really struggled with a difficult currency environment in recent years. Europeans wary of the euro have been piling into francs, which has forced the Swiss National Bank to take extraordinary measures to push the value of the franc back down to more reasonable levels.
All of this has scared investors away from Swiss stocks. But remember, we’re talking about a time horizon of forever here, and this too will pass. Nestlé has experience navigating currency minefields, and it will survive whatever the world’s central bankers throw at it.
At current prices, Nestlé yields just under 3% in dividends, and it has a long history of raising that dividend.
Dividend yield: 3.3%
Long-Term growth: 4.8%
Along the same lines, I’d recommend Anglo-Dutch consumer staples and food company Unilever plc.
I’ll admit to being a little too fond of one of Unilever’s iconic brands… Ben & Jerry’s Cherry Garcia ice cream. But Unilever sells a lot more than just ice cream. If you’ve been in a supermarket anywhere in the world, you are familiar with Unilever’s brands. Among many, many others, they include Axe, Bertolli, Dove, Lipton, St Ives, VO5 and Vaseline.
I don’t know what the future will look like decades from now, but I’m pretty sure we’ll still be purchasing food and personal care products … and Unilever is likely to still be selling them.
Unilever has had a rough go at it in recent years because it gets a large chunk of its revenues from emerging markets, which have been a real minefield. But longer term, Unilever’s exposure to emerging markets is a major source of strength. Population growth and disposable income growth is much higher in the developing world. And Unilever is cultivating the consumer relationships today that will power its growth decades from now.
At today’s prices, Unilever yields about 3.3% in dividends. This is a stock you can buy and safely forget about for years or decades, all while collecting a nice dividend.
Note: After this story was published Kraft Heinz (KHC) made -- and soon after withdrew -- a $143 billion takeover offer for Unilever.
Dividend yield: 2.0%
Long-Term growth: N/A
I would be remiss if I didn’t at least mention an index fund in a list of stocks to buy and hold forever. I’m a little wary of the U.S. market right now, as eight years of nearly uninterrupted bull markets have left stocks looking pricey.
The S&P 500’s cyclically adjusted price-earnings ratio, which takes a 10-year average of earnings in an attempt to smooth out the business cycle, is now an eye-popping 29.3, which implies that the next several years might be rough.
Still, we’re talking about forever here. If you’re looking to buy something, drop it in that proverbial drawer and not look at it again for decades, then it’s hard to beat something like the SPDR S&P 500 ETF. You’re getting a basket of the world’s finest companies and you’re paying a ridiculously low 0.9% in fees.
Over the very long term, the market has returned 7% to 10% per year. So having a little index exposure makes all the sense in the world.
This article is by Charles Sizemore of InvestorPlace. As of this writing he held none of the aforementioned securities.
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