For many investors it is not logical to keep up with the daily market shifts. Their investment style is to buy quality stocks and hold them forever. & # 39; The world's most successful value investor, Warren Buffett, knows this art very well. His favorite stock holding period that he likes is, very literally, "forever."
The benefits of this strategy have been demonstrated by a large number of studies showing that stocks that regularly pay dividends and grow them over time have outperformed cyclical growth stocks. According to a Morgan Stanley report that mentions Factset, dividends in the last 90 years or so accounted for more than 40% of the total return on the market. From 1991 to 2015, non-dividend-paying shares earned only 4.18% return per year, while dividend-paid shares outperformed 9.7% of the annual return on average.
Forever shares pay dividends regardless of what happens to the general economy. Their payouts survive peaks and troughs, wars, depression and bubbles. Below are two examples of shares that pay dividends that can help you better understand the concept:
1- Coca-Cola
The Atlanta-based Coca-Cola food and beverage producer (NYSE: NYSE 🙂 is an ideal asset to hold forever. Although many companies regularly reward their investors through payouts, you will rarely find a company that has been sending dividend controls for more than a century.
This impressive track record does not hide the fact that selling food and drinks is a difficult business that requires constant innovation and fierce competition. Coke has proven in his 127-year history that his brand has immense power to deal with this pressure. At a time when health-conscious consumers are moving away from sugary drinks, the company is expanding its healthy range. As part of his commitment to grow beyond his namesake brand and a & # 39; total beverage company & # 39; Coke buys startup beverage companies to better resonate with health-conscious customers and find new growth areas. The recent investments include Honest Tea, Fairlife dairy and Suja Life LLC.
Trading at $ 46.48 ends yesterday, Coke's stock yields 3.41% annually. That return may not look too exciting, but the company has a long track record of paying out its payouts – for 56 consecutive years now. The quarterly dividend of $ 0.4 per share has more than doubled in the last five years
Coca Cola Monthly Graph
2- Verizon Communications (NYSE 🙂
Telecom companies show many qualities of an forever asset. Regardless of the direction of the economy, internet and wireless connections are likely to be the last items that consumers will remove from their list of mandatory messages. This predictability makes them valuable shares to own in your pension portfolio forever.
Verizon Communications (NYSE: VZ), one of the largest telecom providers in the United States, is an excellent example of this. The company has been steadily paying rising dividends for 30 years. The quarterly share of $ 0.6025 per share has increased by more than 50% since the Verizon shares were first traded in 2000 following the merger between Bell Atlantic and GTE. The stock, tradable at $ 58.99, offers a solid 4.09% annual return, which doesn't look bad when compared to the average return of around 2% offered by companies.
Verizon monthly statement
At a time when the wireless industry is maturing and growth is difficult to achieve, technological breakthroughs are opening up new areas of growth. The next big thing for Verizon is the rollout of the fifth generation or 5G network.
The 5G wireless networks are crucial to the success of some futuristic applications, such as driverless cars, smart homes and remote surgical procedures. And there is no doubt about it, Verizon is at the forefront of this race. In October, Verizon gained a head start with the introduction of residential broadband and television services with 5G technology in four cities that serve as a test site for the company.
Bottom Line
It is always a good time to buy shares, such as Coke and Verizon, and keep them in your income portfolio forever. Companies with sustainable competitive advantages, powerful brands and deep-rooted market positions continue to reward their shareholders through dividends. They are in a better position to ride through economic setbacks and perform better than the long term.
