2 Dividend Stocks That Are Ideal to Hold Forever

 | Apr 05, 2019 12:10

For many investors, it doesn’t make sense to keep track of daily market gyrations. Their investment style is to buy quality stocks and then hold on to them forever. The world’s most successful value investor, Warren Buffett, knows this art very well. His favourite holding period for stocks he likes is, very literally, “forever.”

The benefits of this strategy have been demonstrated by a host of studies that found that stocks that pay regular dividends and grow them over time have performed better than cyclical growth stocks. According to a Morgan Stanley report citing Factset, over the last 90 or so years, dividends have accounted for more than 40% of the market’s total return. From 1991 through 2015, non-dividend paying stocks earned just 4.18% return per year, while dividend paying stocks significantly outperformed with a 9.7% average annual return.

Forever-stocks pay dividends no matter what’s happening with the general economy. Their payouts survive peaks and troughs, wars, depressions, and asset bubbles. Below are two examples of dividend-paying stocks that could help you understand the concept better:

h2 1- Coca Cola/h2

Atlanta-based food and beverage giant Coca-Cola (NYSE:NYSE:KO), is an ideal forever-asset to hold. While many companies regularly reward their investors through payouts, you'll rarely find a company that has been sending dividend cheques for more than a century.

This impressive track-record doesn’t hide the fact that selling food and beverages is a tough business that requires constant innovation and cut-throat competition. Coke, in its 127-year of history, has proved that its brand has immense power to cope with these pressures. At a time when health-conscious consumers are shifting away from sugary drinks, the company is expanding its healthy offerings. As part of its push to grow beyond its namesake brand and become a “total beverage company,” Coke is acquiring startup beverage companies to resonate better with health-conscious clients and find new areas of growth. Its recent investments include Honest Tea, Fairlife dairy and Suja Life LLC.

Trading at $46.48 at yesterday's close, Coke’s stock is yielding 3.41% annually. That return might not look too exciting, but the company has a long track record of hiking its payout—for 56 consecutive years now. Its $0.4 a share quarterly dividend has more than doubled over the past five years.