Passive investing is a great way to create long-term returns. It can be as simple as identifying dividend stocks to buy and hold for the next decade or more. Some of the most successful investors purchase dividend stocks with the intent to hold them indefinitely. Warren Buffett is one such investor with some of the names listed below. He’s a well-known proponent of investing in solid companies with long-term business potential. Indeed, that same simple model applies here as well.
It’s a simple, low-risk strategy that mitigates potential losses, while providing income which can be spent, or used for reinvestment. Here are seven such stocks I think fit this profile.
|Procter & Gamble
NextEra Energy (NEE)
NextEra Energy (NYSE:NEE) is the only energy producer on this list. Perhaps the reason oil stocks are conspicuously absent is because fossil fuel production and consumption are trending downward. That said, NextEra Energy offers the upside of secular trends in its renewable wind and solar business, NextEra Energy Resources (NEER). It balances that potential nicely with its utility business, Florida Power & Light.
The combined business controls the most prominent U.S. utility company and one of the world’s largest renewable companies. Thus, it’s clear that investors should be interested in the stock over the next decade.
In 2022, NextEra Energy reported $20.95 billion in sales. Most of those sales – $17.3 billion – were attributable to FPL. FPL saw its revenue increase year-over-year, from $17.07 billion. So, NEE stock offers a notoriously stable utility business model, and the upside of NextEra’s massive renewable energy business. Notably, NextEra is also among the dividend stocks that haven’t reduced their distribution in 25+ years.
Coca-Cola (NYSE:KO) is the ideal choice for risk-verse, long-term-oriented investors. Unsurprisingly, KO shares comprise 8.5% of Warren Buffett’s portfolio. It’s a great business with readily-identifiable advantages, and remains the dominant name in soft drinks globally. It’s among the dividend stocks worth considering, with a dividend hasn’t been reduced since 1963, and a payout ratio indicative of a healthy business that continues to reinvest in internal growth.
Coca-Cola is also a company that offers products with relatively low demand elasticity. Consumers tend to buy its products steadily across the business cycle. Accordingly, that’s part of the reason that KO stock boasts a low beta of 0.55. It’s simply not a volatile company, which is what beta measures. Instead, it’s a steady performer that risk-averse investors will certainly appreciate for the lack of drama and the steadily-increasing income.
Classic Coca-Cola remains the core product for the firm, but the company maintains a portfolio of 200 brands optimized to provide drama-free returns to investors.
Albemarle (NYSE:ALB) stock is currently in a bit of a freefall, as commodity price fluctuations take their toll on the company’s shares. The firm is a significant producer of the lithium used in EV batteries. This, its shipments will rise and fall as market dynamics shift. That’s abundantly clear, as ALB stock has dropped to an 18-month low, after surging to record highs in late 2022.
However, it wouldn’t be prudent to judge the opportunity in Albemarle by current short-term dynamics alone. Global lithium demand is expected to grow five-fold by 2030. The U.S. is a significant driver of that demand, and Albemarle is a prominent name domestically.
Subsidies caused a rush in manufacturing that led to overproduction last year. Excess inventory has resulted. A drawdown will take time, but overarching trends remain. EVs are here to stay, and lithium will continue to be needed. It might also be wise to sit on the sidelines and try to buy ALB stock, as it continues to get cheaper.
Procter & Gamble (PG)
Procter & Gamble (NYSE:PG) is the world’s largest consumer packaged goods company. Investing in firms that boast long-term, dominant positions in significant sectors is generally safe, so PG stock makes this list.
Various metrics also suggest that now is a reasonable time to make that investment. Procter & Gamble’s price-earnings ratio aligns with average levels over the past ten years. It’s not overpriced based on earnings. Further, over the last ten years, Procter & Gamble has provided excellent returns to investors. It has averaged nearly 10% annual returns during that period. Every dollar invested and held would have grown into $2.52.
That calculation doesn’t include dividends currently of $0.941 per share, paid quarterly. Thus, investors’ total returns are potentially quite a bit higher, factoring in stock repurchases and the power of compounding.
PG stock benefits from higher pricing charged to consumers for things like toothpaste and detergent, proving sustainable demand, even as consumers become stretched.
Medtronic (NYSE:MDT) is a business with apparent, stable demand for the next decade and beyond. The company specializes in medical devices and comprises cardiac, minimally invasive surgery, restorative therapies, and diabetes.
With the world’s major economies continuing to age, it’s reasonable to anticipate that Medtronic will continue to grow for the foreseeable future. The company is expected to reach approximately $30.9 billion in sales this year and $32.3 billion in 2024. That’s not phenomenal growth by most measures, but extrapolated out, such gains add up. By 2023, 1 in 6 people are anticipated to be 60 years old, or more. Aging is associated with increased rates of diabetes and cardiac issues requiring pacemakers. Those are particular strengths for Medtronic.
Medtronic shares are currently very close to being fully-priced, so waiting for them to fall to some arbitrary level might make sense before making a purchase. In any case, long-term trends favor Medtronic.
JPMorgan Chase (JPM)
JPMorgan Chase (NYSE:JPM) would have been a good stock for long-term dividend investors to invest in early in 2023. Those prospects have only gotten better as the year has progressed. JPMorgan Chase is the largest U.S. bank and is only likely to get bigger. The banking crisis has provided the bank an opportunity to consolidate its lead.
It’s old news now that depositors fled through JPMorgan Chase’s doors with their money as the banking crisis unfolded. Indeed, size equates to safety in the banking sector, so into JPM the deposits went. The bank played the part well, shoring up reserves by providing liquidity to failing regional banks. Thus, it all results in JPM stock looking better and better.
If you didn’t buy shares at the depth of the crisis, now is the next best time. JPMorgan will deploy those deposits to build its brand into a bigger, more dominant banking chain.
General Dynamics (GD)
General Dynamics (NYSE:GD) is the lone defense firm among the 68 current dividend aristocrats. That means it boasts 25+ years of consecutive dividend increases, is listed in the S&P 500, and meets liquidity and size requirements. It is arguably the best of the best defense firms for long-term investors.
Top-line results are expected to increase at General Dynamics over the short term. That’s important. But it’s also important to understand that the next decade will also benefit General Dynamics. Geopolitical tensions are rising, and the threat of war with China only increases GD stock’s upside.
This is also among the dividend stocks that have recently declared dividend, with General Dynamics putting forward a $1.32 dividend. This represents a 4.8% increase over last year’s dividend.
Three out of four of General Dynamics’ business lines are defense-related, with only its aerospace division focused elsewhere on Gulfstream business jets. General Dynamics is only likely to get stronger over the coming decades.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.