How do you know which stocks you should hold forever? Look for a long history of success, a dominant market position and insightful management with a focus on long-term growth. It also helps quite a bit when shares generate quarterly dividends!
The following three stocks stand out as excellent opportunities for you to buy now and keep in your portfolio forever. While nothing can guarantee an investment’s success, these stocks come about as close as possible.
Not surprisingly, the coffee chain’s revenues dipped during its 2020 fiscal year. COVID-19 forced most of its locations to close temporarily, so a lower revenue was expected. Given the circumstances, Starbucks did quite well. Its 2020 revenue was $23.5 billion, down from 2019’s $26.5 billion.
As economies started to reopen in 2021, Starbucks showed that it was still a favored brand among consumers. It generated $29.1 billion in revenues during fiscal year 2021.
Importantly, Starbucks was able to increase its dividend payouts during the pandemic. During the first quarter of 2022, Starbucks increased its quarterly dividend from $0.45 to $0.49. This is the 11th year in a row that Starbucks has been able to grow its dividends.
Why has Starbucks been able to maintain market dominance for so long? Several things position the company for long-term success. Some of the most essential factors include:
- A highly innovative pricing strategy that influences purchasing behavior towards higher margin drinks.
- Its ability to adapt quickly to consumer demands.
- A diverse menu that appeals to everyone from devoted coffee fans to casual drinks who need a caffeine boost.
- A store layout that subtly nudges consumers to spend more.
- Plenty of room for international growth (executives say the brand should have 55,000 locations by 2030).
It would take a significant market disruption to dethrone Starbucks as the king of coffee. Its sustainable competitive advantage is nearly impenetrable.
PepsiCo owns a gigantic number of global food and beverage brands. The company does much more than sell sodas. It also owns Quaker Oats, Doritos, Lay’s, Gatorade, Ruffles and Aquafina. If you want a snack, PepsiCo has an option for you.
The numbers also show PepsiCo’s strength as a long-term investment. Its revenues grew from $64.7 billion in 2018 to $79.5 billion in 2021. Not even the pandemic could prevent PepsiCo from growing. Other than the March 2020 dip that nearly every stock experienced, PepsiCo’s share prices have increased rather consistently over the last few years.
PepsiCo is also remarkably strong as a dividend producer. The company has increased its dividend payouts for 49 consecutive years.
The question is whether PepsiCo has room to grow. Its rival Coca-Cola dominates most beverage markets around the world. This is a double-edged sword. Being #2 is not where it wants to sit but conversely it means the opportunity to steal market share is very real. Coca-Cola, on the other hand, has saturated most markets it contests and doesn’t have much room to grow.
Indeed, it already controls a larger percentage of the market, which creates a lot of internal pressure for the company’s brands. PepsiCo’s second-place position gives it a clearer perspective on how to compete, develop new brands and move into even more markets.
Apple has never seemed particularly interested in reaching as many consumers as possible; Android dominates unit volumes globally but Apple has the lion’s share of revenues for mobile phones.
Instead, Apple maintains market dominance by focusing on user experiences made possible through cutting-edge technologies, a sticky AppStore eco-system and unparalleled branding. Buyers who want lower-priced computers and phones can turn to companies like Dell or Samsung respectively.
This strategy has made Apple one of the world’s most influential technology companies. It laid the groundwork for smartphones, tablets and smartwatches.
As consumers looked for more entertainment options over the past few years and avoided crowds, Apple TV, iTunes and other digital services looked increasingly attractive. In 2019, the company earned $260.2 billion in sales. In 2021, it earned $365.8 billion. Is it any wonder with such growth, even after all these years, that Warren Buffett has selected Apple as his largest equity bet for his holding company, Berkshire Hathaway?
As long as Apple continues setting the pace, it should stay ahead of its competitors. While it may never sell as many products as Samsung, it will probably keep making higher profits. Releasing new versions of its phones, tablets and watches nearly every year has paid off. There aren’t many reasons to believe this will change shortly.
A Long-Term Approach to Investing
The most successful investors – people like Warren Buffett – almost exclusively focus on long-term opportunities that generate income over decades of growth. Short-term profits are tempting, but they’re usually limited and require pristine timing again and again.
Adding these three stocks to your portfolio should help ensure that you earn reliable returns throughout your life. They should also add stability that makes it possible for you to take a few risks that could lead to higher returns.