Investors today seem to think "long-term" means a quarter or, maybe, a year. But real long-term investors think decades into the future. If that sounds like you, then you want to own safe stocks that you can hold until 2030 -- or longer. Three stocks that we think fit the bill today are 3M Company (MMM +3.35%), Apple Inc. (AAPL +2.73%), and The Procter & Gamble Company (PG +2.75%). Here's a quick rundown on why our contributors picked these stocks.
A stock with a long history and a bright future
Chris Neiger (3M): Investors looking for a stock that can offer stability for their portfolio over the next decade or more should give some consideration to 3M. This 116-year-old conglomerate has seen its fair share of bull and bear markets and has continued to deliver solid performance for its investors over the long term.
3M is most famous for its Post-it notes and Scotch tape, but its laundry list of 60,000 products means the company knows a lot about diversifying its lineup. 3M has amassed this treasure trove of products through its ongoing pursuit of new patents, and earns about 3,000 of them every single year.
When you are building a portfolio for the future, you need to look past the near term to create a solid investment foundation. Image source: Getty Images.
The company's age and breadth of products aren't the real reasons why it deserves to be on the list, though. The main reason why 3M is a stock you can safely hold on to until 2030 is because it's proven for many decades that it knows how to thrive using a long-term growth mind-set. Consider that 3M consistently spends about 6% of its revenue on research and development so that it can create new products that it will benefit from for years to come.
Additionally, the company has a 60-year history of consecutive dividend increases, and is currently offering a forward yield of 2.7%. The commitment to paying its shareholders and its ongoing investments in future products is exactly the type of mind-set that investors should be looking for from a company.
3M's stock has taken a bit of a hit this year, including a drop when the market was disappointed with management's full-year revenue guidance, but that shouldn't keep investors away. The company's share price gains have outpaced the S&P 500 over the past five and 10 years, and its current investments in new products should help keep 3M on the same path of consistent growth for many more years to come.
A safe bet for the iPhone era
Travis Hoium (Apple): Apple is not only one of the most profitable companies in the world today, it's in a powerful position that should last well over a decade. The tech titan has a great balance sheet, strong cash flow, and a competitive moat that keeps other companies from taking over the high-end smartphone market.
I'll start with the cash flow machine that Apple has created on the back of the iPhone's popularity. Nearly $54 billion of cash has been generated in the past year alone, and that's driven a growing dividend as well.
AAPL Free Cash Flow (TTM) data by YCharts.
There's also $145.4 billion of net cash on the balance sheet, which is a huge cushion for any company should operations go south or if we hit a recession.
The moat around Apple is about as big as it gets for tech companies and keeps competitors from stealing existing customers or winning the most profitable new customers. The iPhone's popularity is the base of Apple's success, giving it the ability to charge a premium compared to rivals, which creates a highly profitable core for the business. From there, customers get locked into the Apple ecosystem through iTunes, the App Store, iCloud, and other services that make the company's Macs, Apple Watch, AirPods, and other devices more attractive. Once you have multiple devices, it's tough to leave the ecosystem.
It's tough to know what the world will look like 12 years from now, but unless there's a technology developed that replaces the smartphone, I think Apple will still be one of the world's biggest companies. Given its balance sheet, cash generation, and competitive moat, it's about the safest bet we have on the stock market today.
A good price with nothing to fear
Reuben Gregg Brewer (The Procter & Gamble Company): Procter & Gamble reshaped its business in an attempt to spur growth. But customer buying habits have shifted as competition from upstarts, often using the internet as a growth platform, has heated up. Investors are concerned that P&G is in for a long rough patch. It might be, but it's still worth buying for conservative investors.
For starters, the stock is still down around 15% from its recent highs and the dividend yield, at around 3.6%, is easily at the upper end of its historical range. That suggests P&G is a pretty good deal today. And the dynamic consumer product company's 100-year-plus history suggests that it will figure out how to adjust to customers, because it has done so many times before. Right now it is focused on introducing natural products, growing internet sales, and being more aggressive with regard to upstart competition.
PG Operating Margin (TTM) data by YCharts.
But what really makes P&G a solid option for investors looking out to 2030 and beyond are its financials. Long-term debt, for example, makes up just 30% of the company's capital structure. It has plenty of financial leeway to make whatever changes it deems necessary. And the changes it has made so far appear to be taking hold. Operating margin, for example, has improved from 17.6% in fiscal 2013 to 21.5% in 2017. And revenue has grown year over year in each of the last three quarters.
While short-term investors are worrying about P&G's ability to keep up with the times, those with a long-term mind-set should be buying P&G. The best part? You get to collect a generous dividend yield while you wait for the company to shift gears -- just like it has many times before.
