How long do you think the average stock gets held? Not very long, it turns out.
Reuters calculated in June 2020 that the average holding period for a stock on the New York Stock Exchange at that point was less than six months, a figure the news service's analysis says has been falling for years.
That's a far cry from the "our favorite holding period is forever" philosophy that Warren Buffett has followed on the way to amassing one of history's largest fortunes. Doing that can be tough, of course, since a lot of investing is emotional, and it's tough to see a holding plunge, even when you know it's a good company with solid prospects.
Dividends can help soothe that angst, providing passive income and the knowledge that over time, dividend-paying stocks often outperform because of the power of total return.
There are currently 65 stocks in the S&P 500 that qualify as Dividend Aristocrats after raising their dividends for at least 25 straight years. Many of them have easily outpaced the S&P 500 in total return, including three here that are not typically considered go-to growth stocks. They own apartments, sell hammers and potting soil, and provide electricity.
Let's have a look at this trio of buy-and-hold royalty:
Being mundane can be rewarding for Lowe's investors
There's nothing particularly sexy about investing in a nationwide chain of some 2,200 big-box home improvement stores, but Lowe's (LOW 0.73%) stock looks particularly alluring right now, off about 31% year to date amid fears about recession and inflation tamping down consumer spending. The 20 analysts following this stock give it a consensus price target of $240 per share.
NYSE: LOW
Key Data Points
Lowe's stock is at about $177 now and, after 48 straight years of dividend increases, is yielding about 2.4%, so you'd be buying for potential share price appreciation as much as income here. A company that has been doing business this successfully since 1946 should know how to navigate this latest storm.
Coming up on 200 years and still powering profits
What is now Consolidated Edison (ED 0.07%) joined the New York Stock Exchange in 1824, making it the oldest continuous member on the venerable Big Board. Its streak of annual dividend increases is only at 48 years, paltry by comparison to its advanced age but still good enough to provide a yield of about 3.3% at a share price of about $93 that's actually up about 9% so far this year.
NYSE: ED
Key Data Points
With a protected market that includes about 10 million customers in New York City and Westchester County, New York, ensuring buyers for its electricity, natural gas, and steam, it seems reasonable to believe that Con Ed, one of America's largest utilities, will continue to power profits for years to come.
West Coast apartments have been very good business, indeed
George Marcus founded Essex Property Trust (ESS 1.43%) in 1971, the same year he also founded what is now the Marcus & Millichap real estate brokerage -- and he's still chairman of both. Essex, meanwhile, has grown its portfolio to about 62,000 apartments in 253 communities.
The company's concentration on higher-end apartments concentrated in desirable areas of Southern California, the San Francisco Bay area, and in and around Seattle has paid off handsomely and should continue to do so. Just in recent days, this residential real estate investment trust (REIT) raised its forecast for 2022 revenue growth because rent increases and delinquencies have proven to be higher and lower, respectively, than expected.
NYSE: ESS
Key Data Points
All that makes Essex look like a possible bargain buy here, with a stock price that's off about 25% so far this year. That's for a yield of 3.3% from a share price of about $265 and an analysts' consensus price target of about $317.
So, what if "holding forever" began 25 years ago?
So, what if "holding forever" began in 1997 and in that year you had placed $10,000 in an S&P 500 index fund, which is typically a pretty smart thing to do. That would now be worth about $66,400.
However, Lowe's would have generated $499,640, or easily rounded to a half-million bucks. Not too bad. The same $10,000 of Essex stock purchased in 1997 would have returned about $229,000 while boring old Con Ed comes in at $107,000 or so, still well ahead of the greater market.
That kind of outperformance -- and in the case of Essex and Lowe's, stock prices that are even more underwater than the greater market itself -- could well make these Dividend Aristocrats good company to keep now and in the future.
