Investing in stocks is one of the very best ways for most of us to grow our wealth. The simplest strategy is also the one that works the best: buying the best stocks you can and holding them as long as possible. The prospects can get even better with dividend stocks, which will pay you just to hold them (and often increase the payout).
When it comes to combining the best strategy -- long-term investing -- with the best dividend stocks, three of our top contributing investors have identified Starbucks Corporation (SBUX -0.90%), Polaris Industries Inc. (PII -2.46%), and Verizon Communications Inc. (VZ -0.67%) as being exactly the kind of companies worth buying now and holding for at least a decade.
Here's what they had to say about these companies and why you should be glad in 10 years that you bought them.
The early stages of its next round of big growth
Jason Hall (Starbucks): It may not seem like there's any room for the global coffee giant to grow from here, particularly on the face of the company's slowing growth in recent quarters. But I think it's way too early to call Starbucks' growth story as being over.
To start, management has a strategy in place to reignite growth in its core North American market, and the results indicate that strategy is working. In the near term, the company is putting a lot of focus on expanding its upscale roasteries and Reserve stores, which should help it continue growing even in its most saturated markets.
But the big prize for Starbucks is on the international scale, particularly China. The company recently doubled down on the Middle Kingdom, taking over the operation of all mainland China stores and giving management more control over its destiny. The growth of China's economy and middle class will have upwards of 500 million middle-class members there within a few years. Over time, management expects this will make China the company's biggest market. Considering how much catching up China has to do before it approaches the U.S., that's a huge amount of growth to come.
The current dividend yield of 2% may not seem like much, but with Starbucks' tremendous earnings growth prospects, the payout could see double-digit increases every year for the next decade or even longer.
Powering through the turmoil
Rich Duprey (Polaris Industries): Power sports vehicle manufacturer Polaris Industries has seen its stock jump 53% this year, having moved past the troubles with its manufacturing quality that had investors on edge. Even with the issues becoming less and less of a clear and present danger to it, where the ATV, snowmobile, and motorcycle manufacturer ends up in 10 years is hard to predict, but it should be an even better place than where it is now.
Polaris owns the all-terrain vehicle market on the strength of its RZR side-by-side that revolutionized the industry when it was introduced because it was the first ATV to comply with federal trail width regulations. Its manufacturing practices of its vehicles has come under some scrutiny for persistent recalls due to fire hazards (numerous industries and at least one death have been reported), but it continues to lead the way despite overall industry softness.
In motorcycles, Polaris took the bankrupt Indian Motorcycle brand and has turned it into a leading contender. Although rival Harley-Davidson still owns more than half of the big-bike market, Indian captured double-digit market share for the first time this past September, putting it well ahead of the rest of the pack.
Polaris Industries pays a modest dividend that's currently yielding around 1.8%, but an impressive track record profit growth has funded increased payouts to shareholders for 22 straight years. This is a stock that will probably be joining the list of Dividend Aristocrats within the next few years, and over the next decade, investors will likely be well rewarded with both higher dividends and a higher stock price.
The future of wireless
Travis Hoium (Verizon): The telecommunications business doesn't get a lot of love from the stock market because it isn't a high-growth industry, but it's one of the most stable. And a leader like Verizon has such a big scale advantage over smaller rivals like T-Mobile and Sprint that it makes the fight for customers almost unfair. That position has led Verizon to a whopping $207 billion market cap and the 4.6% dividend yield we see today.
What makes me excited about the future is the increasing number of companies that will be relying on Verizon's technology to grow and thrive. It's no longer just cellphones accessing wireless networks; there are watches, autonomous cars, and connected infrastructure devices, just to name a few hitting the market. They will drive the number of connected devices higher and leverage the 5G network Verizon is spending billions of dollars building.
It's hard to tell just how important and disruptive 5G wireless will be until it gets here, but that's where Verizon's position in the market really excites me. Speeds up to 20 Gbps, or more than 20 times the speed of LTE, will allow for functionality we've never seen before on mobile devices. Autonomous driving, high-quality streaming, virtual reality, and many other applications will be enabled by the increased speed of wireless networks. Verizon has an established advantage over competitors in building out such a network, and that should pay off handsomely for shareholders over the next decade.