3 Safe Stocks with Big Potential

In long-term investing, it is great to have a nice income stream as well as the potential for your principal to grow. Here are three stocks that offer just that.

Feb 7, 2014 at 8:00AM

In my opinion, the best investments are those that provide both current income and significant potential for long-term growth. With many of the financial sector stocks trading at historically cheap valuations, it seems like a good place as any to look for bargains on great investments. Here is a list of five stocks that I believe will significantly outperform the market in the coming years, while providing you with a steady, growing stream of dividends in the meantime.

A fast-growing area of the financial sector
CME Group (NASDAQ:CME) is one of the largest options and futures exchanges in the world, owning a portion of the Dow Jones indicesin addition to the derivatives and futures exchanges it operates.


On the growth side of things, CME Group has already performed quite well, with earnings projected to increase at an average annual rate of 13% over the next three years, due to the increasing popularity of futures and derivatives trading as both a hedging tool and for speculative reasons as well. 

With a yield of just over 2.4%, CME isn't exactly churning out cash. However, this dividend has grown from just 13 cents per share a decade ago to $1.80 today, translating to an average annual increase of about 30%. While a rate like this won't be sustainable forever, it does represent a willingness of CME's management to increase the amount of capital it returns to shareholders as the company matures.

A safe bank stock?
BB&T Corp (NYSE:BBT) is the 11th largest U.S. bank in terms of assets. Although BB&T trades at a valuation premium to its peers, this company has an excellent history of profitability, and a very high-quality loan portfolio.


Even during the worst years of the financial crisis, BB&T never lost money, earning a profit of $1.15 in its worst year (2009). As a result, its share price never really plummeted, nor was it ever in any real danger of failing.

BB&T has done an excellent job of growing itself, increasing its total assets by 84% over the past 10 years. Even better, there's still plenty of room for growth. Currently, most of BB&T's branches are in the Southeast, but I wouldn't be surprised to see the company expand its geographical presence if things keep going well. 

BB&T's 2.5% yield won't make you rich overnight, but if the bank keeps growing like it has, the dividends should grow and compound nicely over time, providing shareholders with excellent returns.

North America's "Most Convenient Bank"
Toronto-Dominion Bank (NYSE:TD), or "TD Bank", is based in Canada, where some of the most rock-solid financial institutions in the world can be found. TD Bank has grown tremendously over the past decade by a combination of acquisitions and an excellent reputation for customer service. Known as one of the most convenient banks in the world, TD Bank has some of the longest extended hours of any banking institution, with operating hours extending to midnight in some locations. 


As a result of their excellent reputation and acquisitions, TD Bank has grown its assets tremendously, from $255 billion to almost $1 trillion in less than 10 years. Shareholders have done very well, as TD Bank's stock price has nearly tripled over the past decade as has its dividend. 

In regards to safety, consider that TD Bank was one of the only financial institutions based in North America that not only didn't cut their dividend during the financial crisis, but raised it each and every year, at an average increase of 12% each year for the past decade. Currently yielding around 3.6% annually, I feel pretty confident that we'll see similar increases in the years ahead.

Foolish final thoughts
While this is by no means a complete list of banks that pay decent dividends and have growth potential, these are three excellent companies that offer an excellent level of safety -- as well as some exciting potential. With excellent management, high-quality assets, and growing customer bases, these are three stocks that should be excellent investments for as long as you keep them!

Looking for more yield?
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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