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3 Stocks to Buy and Hold for Decades

By Howard Smith - Jan 28, 2021 at 8:56AM

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With a lifelong time frame, it's smart to look for both growth and income.

There are many strategies for investing in the stock market. But the ultimate goal should be meaningful wealth creation, and that takes a long-term plan. 

Investing is always a balance of risk and reward. To grow long-term wealth, a smart mix combines growth and income. Three stocks that have proven records of providing both, and would make a great foundation for a portfolio, are McCormick (MKC 0.67%), NextEra Energy (NEE 0.46%), and Home Depot (HD -0.01%)

Home Depot store front

Image source: The Home Depot.

Home Depot: The strategy is paying off

For a solidly established business, Home Depot is growing like a weed. The company announced a new strategy called One Home Depot in December 2017. The $11 billion investment program includes the digital channel for "interconnected retail." The progress made before the pandemic paid off handsomely in 2020. 

The strategy includes growing online sales and improving business-to-business (B2B) channels for its professional customers. Home Depot acquired HD Supply, a provider of maintenance, repair, and operations products, last November to add to the professional business. It's paying off, as the company said in the third-quarter earnings call that its B2B website is seeing record volumes and engagement with professionals. Shareholders will find out in the upcoming fourth-quarter and full-year 2020 report if the professional business has increased its share of sales beyond the 45% it registered in 2019. 

With growth has come increased returns to investors. Home Depot has raised its dividend by 45% over the last three years, in line with the 40% increase in quarterly revenue over the same period. 

NextEra Energy: A "renewable future"

A long-term portfolio should account for future trends, and not simply consist of blue chip stocks. NextEra Energy fits that bill with its NextEra Energy Resources subsidiary, the global leader in wind and solar power generation. It currently has a backlog of renewable projects that's larger than its existing portfolio, making it a growing business in a fast-growing sector. 

There's an income component from NextEra Energy as well. The parent of electric utilities Florida Power & Light and Gulf Power said in its recent fourth-quarter earnings report that it expects to continue to increase its annual dividend by about 10% through 2022. 

Overall earnings growth isn't what you'd expect from a stodgy utility, but adjusted earnings per share increased 10.5% in 2020 versus the prior-year period. That beat the 10-year compound annual growth of about 8%. This leads among the top 10 power companies, and is almost triple the average of the group. The results give NextEra Energy confidence to predict between 6% and 8% annual earnings growth through 2023. 

a group of McCormick consumer brands

McCormick consumer brands. Image source: McCormick.

McCormick: Consumer and commercial balance

McCormick's brands are well known to consumers, and sales thrived during the pandemic as home cooks bought the popular spices and sauces. The company says its spices, herbs, and seasonings are the category leader in its primary markets, and it keeps growing its portfolio. It added popular French's and Frank's RedHot brands with its acquisition of Reckitt Benckiser's food division in August 2017. Last November, it bought the parent of Mexican-made hot sauce Cholula for $800 million in cash.

McCormick's flavor-solutions group serves restaurants and packaged-food companies. Although that segment's sales have slumped as restaurants and commercial food-service customers cut back or shut down during the pandemic, its consumer segment picked up the slack.

With this balanced business approach, the company is positioned to survive, and even thrive, in most market scenarios. And during slower times, McCormick also provides shareholders with a source of income from its dividend. 

Dividend contribution

Each of these three companies has a growing business that should benefit shareholders for years to come. Although that growth won't always go up in a straight line, all three have steadily grown their dividends, yielding between 1.3% for McCormick, to over 2% for Home Depot. And payout growth over the past five years has been substantial. 

HD Dividend Chart
Data source: YCharts.

Those dividend payments can be used to keep growing your portfolio through reinvestment, or to provide income in retirement. All told, these three names make a solid foundation of a portfolio to hold for decades.  

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Stocks Mentioned

The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
HD
$295.99 (-0.01%) $0.04
McCormick & Company, Incorporated Stock Quote
McCormick & Company, Incorporated
MKC
$100.94 (0.67%) $0.67
NextEra Energy, Inc. Stock Quote
NextEra Energy, Inc.
NEE
$70.12 (0.46%) $0.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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