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3 Great Stocks You Can Buy and Hold Forever

By Scott Levine - May 24, 2021 at 8:37AM

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Grab a hold of these stocks and never let go.

Confused with the crypto craze? Still unsure about what an NFT is after reading yet another article that tries to explain it in layman's terms? Or maybe it's something completely different. Whatever the reason, turning away from the latest investing fads and grounding your portfolio with reliable stocks that won't lead you to lose any sleep at night is a wise investing move regardless of the motivation.

Granted, they may not be the trendiest tickers in investing circles, but Air Products & Chemicals (APD -0.33%), American States Water (AWR -0.15%), and Stanley Black & Decker (SWK 1.00%) are three distinguished stocks that have well-established track records of success and are certainly worth keeping in your portfolio for the long haul. 

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1. Air Products & Chemicals

When looking for stocks to hold onto indefinitely, a good starting place is to look for industry leaders, and in the case of the production of industrial gases and related equipment, Air Products fits the bill. Operating in 50 countries, Air Products serves over 170,000 customers in more than 30 industries, and it's the largest publicly traded company specializing in chemicals. Size isn't everything, but it does count for something, and for Air Products, it suggests a formidable competitive advantage. In addition to the fact that there aren't a preponderance of upstart companies looking to enter the industrial gases market, the leading position that Air Products holds suggests that it's well-positioned for the long term. 

Despite a sell-off in February following an earnings miss, Air Products has climbed more than 9% since the start of 2021, lagging behind the S&P 500, which has risen nearly 11%. Consider how impressively the stock has outperformed the market over the past 20 years, however, and it becomes apparent that Air Products has been a long-term winner for investors.

APD Chart

APD data by YCharts.

Granted, the stock's previous performance doesn't guarantee that it will fare as well in the future, but it's certainly worth acknowledging. What can drive the stock higher in the years (and even decades) to come? Aside from growing its presence in traditional markets like natural gas, the company's commanding position in the burgeoning hydrogen economy through projects like NEOM in Saudi Arabia certainly bodes well for investors. 

2. American States Water

Comb through the ocean of stocks that are possible investments, and you'll find that that, oftentimes, it's the boring businesses that make for the best long-term holdings -- boring businesses like water utilities. No, you won't find American States Water rivaling SPACs and cryptocurrencies for headlines, but it's an indispensable business that will never go out of fashion.

Although American States Water has a subsidiary that provides contracted water and wastewater services to the U.S. government, the majority of the company's revenue and earnings come from the company's two regulated businesses: Golden State Water Company, which provides water and wastewater services to about 262,000 customers in California, and Bear Valley Electric Service, an electric utility that serves about 25,000 customers. In 2020, for example, American States Water reported that the two regulated utilities accounted for 75% and 80% of revenue and net income, respectively.

Aside from the nature of the business, American States Water's dividend provides further evidence why it's a worthy lifelong holding. Paying a dividend to shareholders in every year since 1931 and raising it every year for the past 66 consecutive years, American States Water is a dividend king, putting it in rarefied air among dividend payers. From 2010 through 2020, the company has increased its dividend at a compound annual growth rate (CAGR) of 9.4%, and management seems intent on continuing to raise it at a significant clip for the foreseeable future. In a recent investor presentation, management stated that it's targeting a 7% CAGR in the future.

3. Stanley Black & Decker

While Air Products and American States Water aren't household names, Stanley Black & Decker may sound more familiar. Professional handymen and ordinary do-it-yourselfers alike can probably reach into their toolboxes and pull out something that bears the name of one of Stanley's brands such as Craftsman and DeWalt -- let alone the company's namesakes Stanley and Black & Decker. And it's not only American toolboxes where Stanley thrives; the company generated 40% of its revenue in 2020 from foreign markets.

Besides the company's brand recognition, management's dedication to shareholders represents another reason why Stanley is worth buying and holding. Like American States Water, Stanley is a dividend king. It has returned cash to shareholders by way of a dividend for 144 consecutive years, and the company has raised it for the past 53 consecutive years. Looking ahead, management has targeted returning 50% of free cash flow to investors through dividends and share buybacks, while the other 50% will be used for acquisitions.

Think Stanley's stock can help you build a better portfolio? If so, now seems like a good time to pick up shares. The stock is trading at 14.6 times operating cash flow, slightly less expensive than its five-year average multiple of 15. Consider the price tag from an earnings perspective and the bargain seems even sweeter. Currently, shares are changing hands at 21.3 times earnings, representing a discount to its five-year average P/E ratio of 23.7.

Summing up stocks that'll help you sleep soundly

Tossing and turning at night because you're afraid one of your volatile holdings may be ready to plunge and not recover? There's an easy solution: buy quality stocks that offer a high probability of long-term success. An industrial gas leader like Air Products and industrials powerhouse like Stanley Black & Decker certainly fit the bill, but if you're looking for even less risk, try dipping your toes in the water with a utility like American States Water. 

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Air Products and Chemicals, Inc. Stock Quote
Air Products and Chemicals, Inc.
$261.77 (-0.33%) $0.87
Stanley Black & Decker, Inc. Stock Quote
Stanley Black & Decker, Inc.
$96.93 (1.00%) $0.96
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$4,140.06 (-0.12%) $-5.13
American States Water Company Stock Quote
American States Water Company
$87.70 (-0.15%) $0.13

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

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