The Best Stocks to Hold For a Lifetime

Is there anything worse than buying into a stock that was "sure" to go up a few percent and then holding on and watching the price erode for years? It's gut-wrenching. I've done it, too. I used to trade in and out of risky companies and refused to take a loss, hoping the stock would "come back" someday. Someday didn't usually arrive. But I've reformed: Now I buy for the long term and let the businesses work for me. Allow me to explain and then offer you seven stocks that make an airtight core that can create wealth forever.

A simple question
Are you really in the market for the long term? Here's a quick test: "I buy on the assumption that they could close the market the next day and not reopen it for five years." Would you agree or disagree? That's the buying strategy of superinvestor Warren Buffett. If you're prepared to buy and hold for five years, only the most well-positioned companies will do.

A long-term perspective changes everything: Think years into the future, if not decades. You'll need to rely on companies that have dominant franchises, absolutely indispensable products, and capable managers to drive returns. That positioning (and the confidence that comes with it) means you don't have to worry about next week because the future is going to rock for years to come. You can even take a stock's decline in stride and realize that it makes a great buying opportunity because the price really will come back and then soar even higher over the years.

These are stocks you can hold forever. And if the markets did close for years, well, these securities below (except one) pay solid and growing dividends, too. So let these guys do the work for you.

Stocks to hold forever
The stocks below make a fantastic core for any portfolio and are divided among various industries, so you get some diversification, both by sector and country. But two threads run through all: They provide products that are in constant demand regardless of the economic climate, and their businesses are resistant (though not immune) to technological innovation.

Company

Dividend Yield

Compelling Fact

McDonald's (NYSE: MCD  ) 3.3% World's largest restaurant chain and still has only limited exposure to China and India, meaning lots of room for growth.
Colgate-Palmolive (NYSE: CL  ) 2.9% Strong exposure to emerging markets with its "sticky" products. Dividend growth at 12.8% annually for the past half-decade.
Weight Watchers International (NYSE: WTW  ) 1.2% Has 27% operating margins and pumps out 19 times as much cash as it invests into the business (five-year average).
Brookfield Asset Management (NYSE: BAM  ) 1.6% One of the sharpest management teams on the globe has positioned this company with tons of strategic real estate and hard assets.
Markel (NYSE: MKL  ) 0% 22% growth in book value in the 20 years to 2008.
ExxonMobil (NYSE: XOM  ) 2.1% America's largest energy company and long history of value creation. Always-in-demand assets offer a great hedge.
National Grid (NYSE: NGG  ) 6.8% Locked-in returns from regulated utilities transmission assets. And did you see that dividend?

Source: Yields from Capital IQ, a division of Standard & Poor's.

That's probably as diversified as seven stocks can get, adding some safety to the mix. Their blended yield comes out to 2.6%, so you're getting an above-market payout to keep or reinvest. The histories of these businesses are nothing short of remarkable, but the future looks pretty compelling, too.

The future looks bright
Everyone knows McDonald's as an American restaurant chain, but the company derives more sales from Europe than the States. And that's part of the huge opportunity here. McDonald's has only scratched the surface of what it can do in India and China. In the world's two largest nations, the Golden Arches has just more than 1,000 locations but is planning rapid growth in each. Add in hidden assets and a commitment to return all its free cash flow to shareholders, and you have a dividend play for a lifetime.

Another stereotypically American company, Colgate, provides the chance for robust gains in emerging markets. It sells 40% more in Latin America than in the U.S. already. In Mexico and Brazil, it already has 80% and 70% share in toothpaste, respectively. And consumers tend to stick with trusted personal-care brands and pay more for them. That will drive Colgate's already fast-growing dividend even higher.

Weight Watchers is something of an outlier in this group, but the asset-light, cash-generating power of this company is truly remarkable. For every dollar that it spent on capital investment in the past five years, it pulled out 19 more from the business on average. Even modest growth rates would bulge the coffers here. And with waistlines across the world expanding, the company has a huge opportunity.

Brookfield Asset Management invests in real estate, but you'd hardly know it given the stock price, which is re-approaching its all-time highs from late 2007. That's a testament to the savvy of its management team, which owns some of the choicest real-estate assets in the world's leading cities. It also invests in infrastructure and power assets, meaning this is a defensive stock par excellence.

Markel's strength is demonstrated by its long history of value creation. Its ability to grow book value year after year relies heavily on Chief Investment Officer Tom Gayner. But the company also has strong underwriting, solid relationships with key suppliers, and long-tenured managers. And it's priced at 1.3 times book value -- not mortgage-the-house cheap, but great businesses rarely are.

ExxonMobil: What more can you say about this behemoth? With energy becoming such a strategic asset in the future, Exxon should not be underestimated to deliver solid returns, despite its massive size. Wherever the future of energy lies, this company will be there.

Regulated returns, a nice payout, stability -- there's a lot to like about National Grid. This utility player has inflation-protected rates in the U.K., where it earns 60% of its operating profit, and its toll-road-like assets provide an inflation hedge, too. Management has committed to 8% dividend jumps for the next couple of years, but those are just a few of the reasons that it's an outstanding dividend stock that I'm buying.

Foolish bottom line
The way to wealth involves finding great businesses at reasonable prices, watching them to get comfortable with the ebbs and flows of their business, buying in when the price is right, and letting those gains ride. The seven stocks above can achieve that, and their solid and growing dividends give you even more reason to hang onto these stalwarts and continue to follow them through the years. You can get started in seconds by simply clicking on McDonald's, ExxonMobil, or National Grid to add them to your watchlist, or start a new watchlist and add any company you want. Not only will you get valuable updates on these companies, but you also get immediate access to a new special report, "Six Stocks to Watch From David and Tom Gardner." Click here to get started.

Jim Royal, Ph.D., owns shares in McDonald's, Brookfield, and National Grid. Markel and Weight Watchers International are Motley Fool Inside Value selections. Brookfield Asset is a Motley Fool Global Gains recommendation. National Grid is a Motley Fool Income Investor recommendation. The Fool owns shares of ExxonMobil and Markel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (29) | Recommend This Article (129)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 03, 2011, at 3:45 PM, TheDumbMoney wrote:

    All great, though imho, now, as we are going into a cyclical oil peak is not the best time to buy XOM, just as a matter of timing. It always trends higher in the long term, but is best to buy in times of cyclical weakness. It may go above $90 or $100 before this current spike is done, but chances are decent it will hit $70 again someday, before it ever gets to $120.

  • Report this Comment On March 03, 2011, at 4:19 PM, Blindnomore wrote:

    what is up with MRK? It had a price of about $100 for as long as I can remember. Now all its history shows it running between $250 and $400? Buy and hold is a losing game. Even with dividends. Taxes will eat you up so you may as well make quick turns on big gains. big gains have big retraces on those gains so sell into the run. And if you got the guts, sell into the drop.

  • Report this Comment On March 03, 2011, at 5:36 PM, multi007 wrote:

    Buy SIRI and look back in 20 years!

  • Report this Comment On March 03, 2011, at 6:05 PM, taoiseach wrote:

    Nothing is forever except G-d. XOM has been great but look at not only its eroding replacement rate but present management's icon-breaking in terms of each of exec compensation and stock split philosophy. One suspecrs embedment of rule of the bureaucrats (ROB) rather than oil folk (ROOF).

  • Report this Comment On March 03, 2011, at 7:50 PM, marxengels wrote:

    This is from Yahoo Finance

    Div & Yield: 2.05 (4.40%)

    This is from TMF

    Div. (Yield) 2.80 (5.70%)

    Sept 2010 is the last quarterly report, and no dividends reported. 2009 yearly report reported $2.89/share.

    What gives? What exactly is the dividend expected this year, and where did you find that info?

    Please help this novice investor.

  • Report this Comment On March 03, 2011, at 7:51 PM, marxengels wrote:

    Sorry! The company is question is NGG - National Grid

  • Report this Comment On March 03, 2011, at 11:22 PM, TMFRoyal wrote:

    Hi, marxengels,

    NGG pays a semiannual dividend, which is pretty normal for UK-based companies. You can read further about this company here:

    http://www.fool.com/investing/general/2011/01/21/the-outstan...

    You can also check out National Grid's website for further dividend info.

    Foolish Best,

    Jim

  • Report this Comment On March 04, 2011, at 1:14 AM, sttho wrote:

    Sorry, but what is imho? Anyone? I'm usually pretty text-speak savvy...

  • Report this Comment On March 04, 2011, at 1:23 AM, TMFTomGardner wrote:

    IMHO = In My Humble Opinion.

    Two options for locating this stuff. Google away. Or just ask Fools about it, as you did. :) - Tom

  • Report this Comment On March 04, 2011, at 10:03 AM, Dividendpartisan wrote:

    Good list...the Fool is usually pretty spot on. This time I think I have a better list though:

    www.dividendpartisan.com

    Your thoughts?

    DivPartisan

  • Report this Comment On March 04, 2011, at 10:37 AM, stargazerdo wrote:

    Re: NGG ,Yahoo and MarketWatch list the dividend at 4.4/4.3 % so not sure where 6.8% came from which would be great if it were true.

  • Report this Comment On March 04, 2011, at 10:48 AM, rmb0000 wrote:

    I try to buy all stocks with this mindset, I'm not looking to sell. PM and AXP would be my suggested set it and forget it long term holds.

  • Report this Comment On March 04, 2011, at 11:32 AM, TMFRoyal wrote:

    Hi, stargazerdo,

    NGG pays a semiannual dividend, which is pretty normal for UK-based companies. One dividend is often twice as large as the other. The total yield, however, often gets misreported when media simply double the most recent payout. That move leads to both overstatements and understatements of the yield.

    You can read further about this company here:

    http://www.fool.com/investing/general/2011/01/21/the-outstan...

    You can also check out National Grid's website for further dividend info.

    Foolish Best,

    Jim

  • Report this Comment On March 04, 2011, at 2:32 PM, mikecart1 wrote:

    This article is hypocritical as you shouldn't judge a stock by its past. All the stocks mentioned were at one time thought to be 'bad buys' - especially the supposedly invincible McDonald's.

  • Report this Comment On March 11, 2011, at 2:23 PM, ozzfan1317 wrote:

    I think you can officially add Ko, and MKC to that list I own both. Other than NUE nothing else I hold is over 10 Billion in Market cap and the only two other somewhat big holdings are NFLX and GMCR. Most of my holdings are small and Midcaps but some of them even pay a dividend I enjoy capital appreciation but my portfolio will make me money regardless.

  • Report this Comment On March 11, 2011, at 2:50 PM, fromscottstreet wrote:

    .

    I believe the best way to "buy and hold stocks for a lifetime" is via a DRIP (Dividend ReInvestment) Program, directly with the company.

    A good add to this article would be to state which of these companies have their own DRIPs.

    .

  • Report this Comment On March 11, 2011, at 4:25 PM, HappyDog777 wrote:

    Personally I have a problem with McDonalds as it deceptively offers up uber-unhealthy foods to protract fat food addicts throughout the world. I am a moral value investor and avoid the likes of McDonald like the plague.

  • Report this Comment On March 12, 2011, at 10:15 AM, jaromero1 wrote:

    There's been a lot of hipe around the Cloud Computing movement that is going on. I made two investments at the same time based on information posted in the Motley Fools publication on "The Kings of Cloud Computing" Those two companies were Akamai and Rackspace. While Rackspace has moved up nicely, Akamai has seemed to have tanked, now by $10/share for me. Can anyone share some insight on why Akamai is headed in the wrong direction as more investors become aware of the Cloud Computing movement? What are they doing or not doing as the case may be that is causing the bottom to fall out on this stock?

  • Report this Comment On March 12, 2011, at 11:00 AM, raveypolycal wrote:

    I don't know. My first reaction is that I am skeptical of a Ph.D. (sorry) who chooses stocks for "an anchor list" most of which are chincy with dividends. Sharing profitability is important to us. And, Exxon is a dying company. They are having trouble replacing reserves. Big ain't necessarily good in their case. I would rather see Caterpillar, MO, PM, Coke, and PFE or Lilly on this list. We own all these and now we are putting together a "beyond anchor take some risk list" in the energy area which we believe is a place to be from here on out until the planet implodes. That list of 18 stocks includes stocks like Copano (oil/gas exploration) all the way down to American Electric Power (largest electric utility around and solid). All the stocks on our "beyond anchor list" have yields of 4% or more, some over 6%. We already own ERF and PVX (and now Pace Oil/Gas due to reverse merger - like a spin-off).

    Thank you.

  • Report this Comment On March 12, 2011, at 11:10 AM, raveypolycal wrote:

    Follow-up. I forgot. Interesting how you never see the pundits talk about private equity. And I know some of the readers of these columns qualify for private equity investments. We are involved with a company in the Gulf shallows and deep water that is finally starting to pay some dandy distributions. Even with the attempt by the current communists to delay drilling permits beyond the moratorium. Private equity, no debt, no banks to pay, yes more risk in other ways but possible dandy returns as PART of the total portfolio.

    Thanks again.

  • Report this Comment On March 12, 2011, at 4:39 PM, kalho13 wrote:

    I would have to agree with HappyDog in that I will not invest in MCD because I have a problem of how they are poisoning the people of this planet with their low quality and nutritionally deficient food. Some people may disagree as they choose not to pay attention to what the underlying business does as long as it proves to be profitable; but again when everyone is in it just for the profit we cannot complain about wall street behavior.

  • Report this Comment On March 13, 2011, at 8:22 PM, riwaterman wrote:

    @jaromero1 RE: Akamai - they basically said recently at their conference call that their future expectations would be down. They also disappointed on earnings

    I own it too and was very disappointed when it nosedived.

    I think long term they will be fine but the next six months money in AKAM might not be our best bet.

  • Report this Comment On March 16, 2011, at 2:40 PM, Paulistano wrote:

    Didn´t I just read that McDonald´s has been knocked off its perch as the biggest fast-food chain in the world by Subway?

    I wouldn´t eat at either and as I only invest in companies whose products and services I use, I wouldn´t touch them.

    Markel? I´ve never even heard of it and I notice the writer doesn´t even describe what it does.

    The whole point about investing in variable income is to be flexible. After all, who wants to buy shares and hang onto for five years in the hope that they will somehow or other rise in value?

  • Report this Comment On March 16, 2011, at 3:00 PM, catoismymotor wrote:

    Paul,

    Are you not capable of researching Markel Corp (MKL) on your own?

  • Report this Comment On March 16, 2011, at 3:06 PM, TheDumbMoney wrote:

    Paulistano. Me.

  • Report this Comment On March 16, 2011, at 5:44 PM, adamhu wrote:

    AKAM:

    Suffered not from good fundamentals and business model, but an overly generous stock price.

    It's not enough to spot world class companies (Coke, easy), but valuation is often the more difficult part of it.

    Luckily, if you get the first part right and aren't completely off on the second, you will probably do half-way decen.

  • Report this Comment On March 16, 2011, at 7:26 PM, Paulistano wrote:

    Dear Cato,

    As you are being so familiar as to call me Paul (not my name incidentally - Paulistano refers to São Paulo, Brazil where I live ) I am returning the friendly compliment.

    Could Catoismymotor mean you are from Catanduva (also in Brazil), Catterick in England or the Catskills in the US?

    To your point.

    Why should I research a company I´ve never heard of because somebody on this site claims the share is worth holding forever?

    If I was to recomend a company that claimed to turn base metal into gold would you feel you had to research it before reaching the conclusion that it was not a good idea?

    As for dumberthanafool, thanks for commenting you are living up to your name because wishful thinking won´t get you anywhere.

  • Report this Comment On March 19, 2011, at 10:04 AM, Mpolomarco wrote:

    Paul,

    So what?

  • Report this Comment On September 29, 2011, at 11:28 AM, boru1916 wrote:

    I am new so...easy on the Mick (me). What do you think of BIP, DYER, BORK, & CANA? Loooking for companies with good long term returns & dividends but I am tired of the on-line hooks to watch a1/2 video or pay $99...suggestions?

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