We Fools love to invest in companies for the ultra long-term. That's why we constantly scour the markets in search of companies we believe can be owned for decades.
So, what stocks have we found that we think can be safely owned until 2030? We asked that very question to a team of Fools, and they picked W.P. Carey (WPC 0.27%), Mastercard (MA -0.07%), and Lockheed Martin (LMT -0.20%).
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A rock-solid real estate play for the long-term
Matt DiLallo (W.P. Carey): Real estate investment trust W.P. Carey has everything an investor would want in an ultra-long-term holding. At its core, the company owns a diversified portfolio of properties in the U.S. and Europe that it has leased to credit-worthy tenants. These aren't just any properties but are critical facilities for its clients such as corporate headquarters, essential distribution facilities, and important R&D or data centers. Because of the vital nature of these assets, tenants typically sign very long-term leases. In fact, the average remaining term across W.P. Carey's portfolio is 9.6 years. This structure provides the company with clearly visible cash flow.
Because of the stability of its cash flow, W.P. Carey can afford to pay a very generous dividend. At the company's current low-$60 stock price, it yields 6.4%. That payment is on rock-solid ground considering that the company only expects to pay out 76.5% of its cash flow this year via dividends. Meanwhile, the company further enhances its financial security by maintaining a top-notch balance sheet, evidenced by an investment-grade credit rating backed by strong credit metrics. For example, it has 55.2% equity in its assets, which is a well above the 40% required by rating agencies.
While W.P. Carey's yield alone is quite the draw, it also has several ways to grow. For example, most of its leases have contractual rent increases that will expand cash flow over time. Meanwhile, the company has a long history of buying and building assets to grow its portfolio. In 2017, for example, the company plans to acquire between $450 million to $650 million in real estate. It intends to finance the bulk of those additions by recycling capital out of lower-return assets, with its current guidance to sell $350 million to $550 million in assets this year. However, between excess cash flow as a result of the conservative dividend payout ratio and its healthy balance sheet, W.P. Carey has ample financial firepower to buy more properties if the opportunity arises.
With a conservative portfolio and financial situation, W.P. Carey should deliver a steadily growing income stream to investors for years to come, making it an excellent stock to hold for the very long term.
This growth engine is still getting warmed up
Brian Feroldi (Mastercard): While I own many stocks that I could see myself hanging onto "forever," I must admit that payment processing giant Mastercard is one of my absolute favorites. This $125 billion company giant plays a vital role in connecting consumers, financial institutions, and merchants together to enable electronic payments. In return, Mastercard gets to collect a small fee for each transaction that occurs on its network. With trillions of dollars in payments processed on its network each year, those small fees add up quickly. So quickly, in fact, that Mastercard was able to pull in more than $10 billion in total sales last year.
What's wonderful about Mastercard's business model is that it costs the company very little to process one more transaction. That means its business is highly scalable, which is why Mastercard's profit margin has consistently moved higher over the years. When combined with the company's healthy appetite for buying back stock, Mastercard's long-term EPS growth has been nothing short of spectacular.
MA EPS Diluted (TTM) data by YCharts.
Despite boasting a long history of success, there are still reasons to believe Mastercard can continue to grow from here. That's because 85% of global transactions still occur using cash or check. Given the convenience and speed of switching to electronic payment methods, I'm convinced Mastercard will be able to crank out double-digit profit growth for years to come. That's why I have no plans of parting ways with my shares anytime soon.
Safe until 2030? How about safe until 2070?
Rich Smith (Lockheed Martin): Finding a stock that will be "safe" to own for the next 13 years may sound ambitious, but it's not. The fact is, I've got a stock idea that should be safe to own for the next 53 years -- if not more.
Its name is Lockheed Martin, and it's the biggest pure-play defense contractor in America -- and by extension, probably the biggest in the world. Lockheed, as you may be aware, produces the F-16 Falcon fighter jet -- the best-selling fighter jet in the world. Lockheed also produces the C-130 Hercules military transport aircraft -- itself the world's best-selling non-fighter jet military aircraft. And now, after acquiring Sikorsky helicopters last year, Lockheed has brought the famed Black Hawk helicopter under its corporate umbrella, meaning it also produces the world's most popular military helicopter.
Suffice it to say, with franchises this strong, Lockheed Martin stock isn't going away anytime soon. But what is it that makes me so sure Lockheed Martin is safe to own until 2030 -- and then 40 more years after 2030?
That would be the F-35 stealth fighter jet.
Adm. Mike Mullen, former chairman of the U.S. Joint Chiefs of Staff, once predicted that the F-35 would be "the last manned fighter" jet the U.S. ever builds. (Future jets will probably be drones, piloted remotely, or autonomously.) Until that future arrives, though, Lockheed Martin doesn't have to fear any challenge to its fighter jet franchise from rival military aircraft builders Boeing or Northrop Grumman. Simply put, the Pentagon gave everyone a chance to bid to build its "last manned fighter." Lockheed won that competition, and there won't be a recount.
What's more, the Pentagon expects to still be flying F-35s 60 years from now, so Lockheed Martin can expect to remain insulated from competition for a good, long time. I think it's safe to say that an investor who buys Lockheed Martin today can count on being able to safely own it until 2030 -- at least.
