Not all stocks will last forever, and that's why if you're investing for the long haul, it's important to be careful when selecting which stocks to buy today. Not only will you want to invest in successful businesses but you'll also want to diversify to minimize your overall risk. And once you find a good mix of stocks that you can hold in your portfolio for decades, you can just sit back and watch them rise in value.
Three stocks that make excellent candidates for that purpose today are Domino's Pizza (NYSE:DPZ), Intuitive Surgical (NASDAQ:ISRG), and American Express (NYSE:AXP). Through a mix of capital gains and dividends, they can grow your portfolio's value and set you up for a great retirement while also generating recurring cash flow along the way.
1. Domino's Pizza
Domino's makes this list because of the simplicity of its business. Regardless of the technological change that'll take place over the years, it's safe to assume pizza will remain popular, and it may only be how they're delivered that changes over time. And driverless delivery is already something the company's been experimenting with in recent years, as Domino's looks to take advantage of a new form of delivery that can be much more efficient.
But its core business is still strong, as has become evident during the coronavirus pandemic. In its most recent quarterly results for the period ending Sept. 6, its sales of $967.7 million were up 17.9% year over year.
The company's same-store sales growth in the U.S. was 17.5% -- that's up a staggering amount from a year ago when its same-store sales grew at a rate of just 2.4%. Whether you're looking for a good coronavirus stock to buy or are planning to hold for the long term, Domino's is a great investment that's proving to be both pandemic and recession-proof. In each of the past 10 quarters, Domino's has posted a profit margin of approximately 10% or better.
Domino's also pays its shareholders a quarterly dividend of $0.78 that yields 0.80% annually. It's not a huge payout and it's less than the S&P 500 average of about 2%. However, there's potential for these payments to get much larger, as Domino has increased its dividends by 20% this year and they've grown 152% from the $0.31 the company was paying in 2015.
Year to date, shares of Domino's are up 34%, beating the S&P 500's 5% return over the same period.
2. Intuitive Surgical
Intuitive Surgical doesn't pay a dividend, but this stock is a great long-term hold because it's built for the future. Its robotic-assisted da Vinci Surgical Systems and instruments are minimally invasive and can help surgeons with complicated operations and improve their overall efficiency. Intuitive has been steadily growing the installed base of the devices to 5,865 systems as of Sept. 30, which is an increase of 8% from a year ago.
Unfortunately, the coronavirus pandemic is having a negative impact on the company's performance this year because hospitals have been deferring procedures and focusing on patients with COVID-19, which has translated to less use of Intuitive's products. On Oct. 15, the company released its third-quarter results for the period ending Sept. 30, and Intuitive reported that there was a 7% increase in the number of da Vinci procedures during the period (a year ago the growth rate was 20%). But that's still a big improvement from the 19% decline Intuitive reported in the second quarter for the period ending June 30.
In its most recent Q3 results, Intuitive's sales of $1.1 billion were down about 5% as COVID-19 continued to weigh down the quarter. Last year, the company's sales topped $4.5 billion -- an increase of 20% from the previous year.
Intuitive is likely to get back to that strong growth rate once hospitals resume normal operations, which may not happen soon with COVID-19 cases still on the rise. However, with the industry still in its early growth stages, Intuitive is an attractive long-term buy today that can produce great returns for your portfolio for many years. Year to date, shares of Intuitive are up 22%.
3. American Express
The financial services company normally generates strong numbers from companies and consumers traveling and taking advantage of AmEx's rewards. This year, however, with the coronavirus pandemic keeping travel to a minimum, that hasn't been the case. On Oct. 23, the company released its results for the third quarter ending Sept. 30, and revenue net of interest expense was $8.8 billion -- down 20% from the prior-year period. However, AmEx notes that "since the lows of mid-April, we have seen a steady recovery in our overall spending volumes." In the previous quarter, ending June 30, the company's revenue net of interest expense was $7.7 billion, down 29% during a period marred by lockdowns.
In addition to credit cards, companies also go to AmEx for automation and cost-saving opportunities. Businesses can minimize overhead and headcount by utilizing the company's automated payments to help with the accounts payable process. With many businesses slashing expenses and laying off employees amid the pandemic, this could be a strong growth opportunity for AmEx as companies try to do more with less. An increase in automation and focus on efficiency are trends that are likely to last far beyond the current crisis, and that's what makes AmEx an exciting buy for the long term since it's well-positioned to meet those needs.
AmEx stock will do well when the economy is strong, so you can safely hold on to it for years. It also pays a dividend that yields 1.8%, which can generate some great recurring income along the way. Year to date, the stock is down more than 23%, offering an attractive entry point for a long-term investment.
Why all three are a great mix together
Here's a quick recap of how all three stocks are doing this year:
While the temptation may be to only buy shares of Intuitive or Domino's since they're doing well this year, you're better off buying all three stocks to take advantage of greater diversification, which could lead to much stronger returns over the long term.
Intuitive doesn't pay a dividend but it offers some incredible long-term growth prospects. Some researchers are projecting that the market for surgical robots will continue to grow at a rate of more than 21% until at least 2026, where it will rise to an estimated value of $6.9 billion. And this is with robotic surgery still in its early stages. Domino's, meanwhile, gives investors a steady business that is proving it can perform well under both a recession and a pandemic. And although AmEx is struggling in 2020, that's not a trend that's likely to last once the economy is back to operating at full capacity, and businesses and consumers are spending more on travel and entertainment.
Together, these three stocks can diversify your portfolio and create some great returns regardless of what's happening in the economy.