These companies have stood the test of time and will likely provide reliable dividend income for the foreseeable future.
One of my mottos is “It’s always better to be overprepared than underprepared.” This often involves being proactive. This applies to education, work, sports, finances and many other areas of life.
When it comes to finances, it’s especially important to be proactive when it comes to saving for retirement. Sure, some Social Security benefits may be helpful, but many people point out how lacking they are. In a recent Motley Fool survey, half of respondents said they were considering returning to work because of low Social Security benefits.
Even if you have about 30 years until retirement, it’s never too early to start thinking about savings plans and investments that will help you reach your goals. Here are two great companies to add to your portfolio and hold onto for the next 30 years.
These aren’t fast-growth stocks, but they’re as reliable as they can be and can provide you with valuable passive income.
Image source: Getty Images.
1. Coca-Cola
Coca-Cola (KO 0.24%) has been around since 1892 and was the world’s leading non-alcoholic beverage company for much of that time. If you were to name the five most famous brands in the world, Coca-Cola would definitely be on that list.
When you think about investing for retirement, companies that offer above-average and reliable dividends come to mind, and Coca-Cola has both. More important than Coca-Cola’s dividend yield (which is bound to fluctuate) is its 62 consecutive years of dividend increases.
Six decades of increasing dividends is no small feat, but Coca-Cola has made it part of its DNA. Over the past 30 years, Coca-Cola’s dividend has increased nearly 900% to $0.485 per share.
KO payout data by YCharts.
The above corresponds to an average annual dividend increase of approximately 7.9% for Coca-Cola. Assuming this trend continues (there’s no way to predict, so I’ll focus on “what if”), the current $0.485 quarterly dividend could be around $4.83 per quarter in 30 years.
2. Procter & Gamble
The name Procter & Gamble (PG -0.31%) (P&G) may not ring a bell in many households, but many of the products it sells certainly do. It owns Tide, Pampers, Tampax, Old Spice, Bounty, and dozens of other popular brands.
Like Coca-Cola, P&G is the Dividend King with 68 consecutive years of dividend increases and 134 total years of dividend payments. Talk about consistency.
P&G is a classic example of a defensive stock. We sell products that people buy regardless of their financial situation. While we don’t think there will be many quarters with double-digit revenue growth, there’s no question of long-term stability.
Some may think of P&G as a “boring” stock, but sometimes boring is what you want when investing for the long term. For P&G, a better B-word is “billion.” Because that’s what the company continues to produce. In its most recent quarter (ending September 30), P&G had revenue of $21.7 billion and net income of $4 billion.
Sales and net income growth has been modest over the past decade, but if you’re an investor in P&G, your main focus will probably be on ensuring the dividend. P&G’s free cash flow for the past quarter was $3.9 billion, more than enough to cover the $2.4 billion it paid out in dividends.
P&G is also committed to returning shareholder value through share buybacks. This is a way to ensure that investors get more value from their stock, even if the company goes through a downturn.
PG Stock Repurchase (Quarterly) Data by YCharts.
It’s all about reliability
If you’re investing with the next 30 years in mind, you’ll want to invest in companies that have stood the test of time and proven to be virtually indispensable. Those are Coca-Cola and P&G.
Although Coca-Cola has a strong position in the non-alcoholic beverage industry, it also refuses to use past successes to justify complacency. Whether it’s ready-to-drink alcohol or plant-based beverages, Coca-Cola is demonstrating its readiness to invest in research and development to stay ahead of the curve and adapt to changing consumer preferences.
P&G’s longevity is almost guaranteed because of the products in its portfolio. Before people give up the household, hygiene, and cleaning products that P&G sells, they will likely give up many other products and services.
When you look back 30 years from now, you may be glad you had these two companies in your portfolio. Ideally, you would maximize your stock count using a dividend reinvestment plan (DRIP) and start paying out cash in retirement.
A solid foundation in dividend stocks provides a reliable source of supplemental income during retirement.
