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Seven Dividend Stocks To Own Forever 11/15/16

Seven Dividend Stock To Own Forever


    The pollsters had it wrong. Trump won. Maybe the monumental miscalculations we have just witnessed will lead you to reexamine conventional wisdom in general.


    The conventional wisdom is that those who can find (and afford to pay) the most responsible, well-respected financial advisors can expect to have outstanding results. From our experience, that’s not true.


    In fact, the small investor, acting on his or her own, has as good as or even a better chance to succeed. It’s been proven over the years. Nevertheless, most people prefer to leave the responsibility for investing to professionals—even if 86% of those professionals don’t get results that are as good as the market in general (McGraw Hill Financial).


    Why do we do that? The truth is that many people don’t want the responsibility for their own investing because they don’t think they know enough to be successful. Stock market investing involves a lot of uncertainty and people really don’t like uncertainty.


    And as much as people don’t like uncertainty--the stock market likes it even less. With a Trump White House in the offing, it seems certain that we are in for a bumpy ride--at least for the short term. So, does that mean that this is a good time to be sitting on the sidelines?


    Probably not! Short-term, market volatility may provide some opportunities but it will be difficult for even the most agile professionals to take advantage of them. Especially in times like this, it’s important to keep a long-term outlook. If you get out now, it may be difficult to get back in before the next raging bull market, while investors who stay in for the long term will find that the ups generally outweigh the downs.


    Here’s an example: Suppose you had invested $1,000 at the beginning of May 2008. If your performance matched the overall market, you’d have lost $363 by the end of November 2008 and $447 by March 2009. Your $1,000 would be down to $553. However, if you had held on, you’d have recouped your losses in three years and by the close of September 2016, it would be worth $1,847. If we take a longer-term view and suppose you invested that $1,000 at the start of 1973, you’d have lost 17.9% in 1973 and a further 20.7% in 1974. Your $1,000 would have been down to $614. However, if you had held on, you’d have recouped your loss by July 1980 and by the end of 1986, it would have grown to $3,948. What would it be worth at the end of September 2016? A whopping $66,328!


    So staying put in the market is a good idea. But if you are not already invested, might this be a bad time to jump in? In such uncertain times, you may wonder whether this is the time to take the plunge. The answer is, don’t take the plunge. Instead, go in slowly.

    Such a strategy offers many advantages.


    The best way to go in slowly is by investing through a company-sponsored dividend reinvestment (DRIP) where you can make small regular investments to build up holdings over a period of years—often without fees.


    DRIPs also answer the question, how can you create a portfolio that will match the overall market?” That’s because you only need to own is a single share of company stock to qualify to establish a DRIP account. Therefore, for a small upfront investment, you can set up accounts in a widely diversified portfolio—without having to resort to a mutual fund.


    In fact, because you can easily build up holding over time often without fees, investors are likely to have done even better than the results described in the illustration above. That’s because a dollar-cost-averaging strategy virtually “causes” you to buy more shares at market dips and fewer shares when stock prices are relatively high. Investors have the certainty that they will have bought their shares at a lower cost per share than the average price the shares were selling for over the period they were building up their holdings.


    Here is a listing of seven DRIP stocks—all dividend payers—that are solid companies to hold over the long term. Don’t set up all seven accounts unless you know that you will have enough money to invest regularly to build up holdings over time.


    Johnson & Johnson (JNJ)

    Johnson & Johnson was founded in 1886 and listed on the New York Stock Exchange in 1944. Today, it has a $317 billion market cap and operates in more than 60 countries across the world, employing 126,500 people. J&J’s high profitability allows the company to dedicate more than $9 billion on R&D expense last year alone. It has increased its dividend for 54 years in a row. Its stock trades for at a P/E of 20, which is less than the S&P 500 P/E of 24.4.

     

    Dr Pepper Snapple Group (DPS)

    Dr Pepper Snapple Group was established in 2008, following the spin-off of Cadbury Schweppes Americas Beverages (CSAB) by Cadbury Schweppes plc. CSAB had formed in 2003 by bringing together four North American beverage businesses: Dr Pepper/Seven Up, Snapple Beverage Group, Mott’s LLP, and Bebidas Mexico. Its leading brands also include A&W, Canada Dry, Diet Rite, RC, Crush, Welch's, Yoo-hoo, Hawaiian Punch, and Sunkist, making it the third-largest beverage company in North America. DPS currently has a 2.5% dividend yield and a payout ratio of 48%. In total, Dr. Pepper Snapple Group has compounded its earnings-per-share at 10.3% a year since becoming a standalone company. The company has distribution agreements with both Coca- Cola and PepsiCo, saving it the expense of building its own global distribution network.

     

    Union Pacific (UNP)

    Founded in 1862 and based in Omaha Nebraska, Union Pacific Railroad Company is the largest railroad in the United States, linking approximately 20 states in the western two-thirds of the country by rail. The Company's business mix includes agricultural products, automotive, chemicals, coal, industrial products and intermodal. The Company's network includes approximately 32,080 route miles, linking Pacific Coast and Gulf Coast ports with the Midwest and Eastern United States gateways. With a market cap of 73.93 billion and 833 million shares outstanding, Union Pacific currently has a PE of 17.78 and earnings per share of $4.99.

     

    Lockheed Martin (LMT)

    Lockheed Martin’s 133,000 employees provide research, design, manufacture, and maintenance of aerospace and defense products, including missile systems, electronics, aeronautics, and information systems. Annual revenues total about $45 billion. Programs include the F-16, F-22, and F-35 fighter planes, the C-130 transport and C-5 airlift planes, and Titan launch vehicles. Its Electronic Systems unit provides tracking and fire control systems for ground combat, surface ship and submarine warfare, and rotary-wing aircraft. The Space Systems segment includes satellites, defense missile systems, and fleet ballistic missiles. Lockheed Martin’s products are necessary for the defense of the United States. Lockheed Martin has grown its earnings-per-share at 8.6% a year over the last decade.

     

    ExxonMobil (XOM)

    Founded in 1882, ExxonMobil engages in the exploration and production of crude oil and natural gas and the manufacture of petroleum products, as well as the transportation and sale of crude oil, natural gas, and petrochemicals, which includes olefins, aromatics, polyethylene, polypropylene plastics, and other specialty products. It also has interests in electric power generation facilities. It increased its dividend by 2.7% in 2016, which was its 34th consecutive year of dividend increases. ExxonMobil, a Dividend Aristocrat has paid a dividend for more than 100 years. It has a 3.6% dividend yield. Over the last decade, it has traded for an average price-to-book ratio of around 2.7. The company is currently trading for a price-to-book ratio of 2.04.

     

    Franklin Resources (BEN)

    Founded in 1947 and based in San Mateo, California, Franklin Resources is a publicly owned asset management firm that provides services to individuals, institutions, pension plans, trusts, and partnerships. Best known for its Franklin Templeton funds, it manages client-focused equity, fixed income, and balanced portfolios and launches equity, fixed income, and balanced mutual funds, as well as providing retirement plans. With additional offices in the United Kingdom, Hong Kong, China, Australia, the Bahamas, and Canada, Franklin invests in the public equity and fixed income markets across the globe. Franklin Resources stock currently has a 2.1% dividend yield. Analysts expect earnings-per-share growth of around 4% to 5% a year going forward, in line with historical results. Much of this growth will come from share repurchases. The company has reduced its share count by around 2.5% a year over the last nine years. The dividend has been increased for 36 consecutive years.

     

    NextEra Energy (NEE)

    NextEra Energy is the parent of Florida Power & Light, a utility that engages in the generation, transmission, and distribution of electricity to 4.7 million customer accounts (serving nine million people) in a 27,650 square mile area of eastern and southern Florida. Its NextEra Energy Resources subsidiary is a non-regulated power generator that produces electricity from nuclear, natural gas, solar, and wind generation. It is the U.S. leader in production of energy from wind and produces 95% of its output from renewable resources, with a capacity to produce 8,500 megawatts from those sources. With a market cap of 59 billion and 467 million shares outstanding, NextEra Energy currently has a PE of 22.10 and earnings per share of $5.60.

     

    You may wish to establish accounts of some of the companies whose products or services you know and enjoy. You can find out whether a company offers a DRIP at our Website, directinvesting.com. And here is a list of companies that offer DRIPs and do not charge a fee for investing and dividend reinvesting.

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