One of the best parts about investing is that if you find a great company worth owning for the long term, things can actually get better over time. As that company grows, you have a good chance of being rewarded with share price growth, dividends, or some combination of both. Often, the rewards compound -- and get better -- the longer you hold the shares, just like a long-term relationship with your Valentine.
In honor of the rewards that can come from a successful long-term investment, three Motley Fool contributors went out in search of stocks they'd be willing to give to their own long-term Valentines. They picked Digital Realty Trust (DLR 0.67%), Walt Disney (DIS -0.45%), and Genuine Parts (GPC 11.22%). Read on to find out why, and decide for yourself whether any of them just might be one you'd be willing to have and hold.
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A gift that never stops giving
Eric Volkman (Digital Realty Trust): If I were to wrap a stock and gift it to a sweetheart, it'd be a solid company that generates its own presents -- dividends -- on a regular basis.
One that I've held in my own portfolio for quite some time is a specialty real estate investment trust (REIT), Digital Realty Trust. As its name implies, the company operates an ever-growing collection of data centers, the facilities that house the banks of servers that power websites and corporate networks.
Data centers aren't at the cool end of the tech spectrum. None have the "ooh!" factor of Apple, with its beloved gadgets, or Activision Blizzard and its library of fun video games so compelling that Microsoft is ready to spend tens of billions of dollars to buy it. Instead, data centers are the infrastructure and plumbing of the digital age.
Nobody loves infrastructure and plumbing, yet data centers are essential to the functioning of any company's online life. Any business that wants any kind of presence at all, let alone customers, needs a website and a network, and that need grows ever more sophisticated with the technology available. That's a major dynamic behind the constant and consistent growth of Digital Realty Trust's business.
After all these years (the company was founded in 2001), the REIT is still posting impressive top-line growth -- revenue in the most recently reported full year (2021) was 13% higher than the 2020 tally. Annual "core" (basically, adjusted) funds from operations -- the most useful profitability metric for REITs -- rose at almost the same percentage rate.
REITs are required to pay out the vast bulk of their net profits in the form of shareholder dividends, so the climbing profitability of Digital Realty Trust means an increasing dividend, too. The company's payout has increased every since its initiation way back in 2005, rising nearly fivefold across that stretch to an annual disbursement of $4.88 per share from $1. The latter, by the way, yields a robust 4.3% these days.
Walt Disney has millions of beloved fans
Parkev Tatevosian (Walt Disney): To my long-term valentine, I would give the ultimate long-term stock. Walt Disney has been delighting families for roughly a century. Because it relies on bringing large groups of people together, Disney was devastated by the coronavirus, and it's still not back to full strength.
That is partly why I think now is an excellent time to buy Disney stock (even if you buy it as a gift). Even accounting for COVID-19, Disney's revenue grew from $45 billion in 2013 to $83 billion in 2022. Its movies, theme parks, hotels, cruise ships, and merchandise draw millions of consumers annually, with little likelihood that the business will disappear anytime in the next decade.
More importantly, the company generates excellent profits while delighting consumers. In the last decade, Disney's operating profit margin has averaged a robust 22.3%. Finding a company that is as beloved as Disney would not be easy. It would be harder still to find one with similar profitability. Disney has accomplished the lucrative task of making customers feel like they received incredible value while earning excellent profits.
DIS PE Ratio (Forward) data by YCharts
A company loved by many of its customers, with nearly a century of history, operating with an excellent profit margin, is an ideal long-term stock to gift your valentine. It doesn't hurt that the near-term headwinds caused by the pandemic have the stock selling at a reasonable valuation.
Reliable, affordable, and consistently giving
Chuck Saletta (Genuine Parts): Cars have long been symbols of personal freedom. With a working car, you can generally get up and go, from wherever you are to wherever you need to be, as long as there's a road that connects the two places.
The key word in that last sentence is working. When a car breaks down, it quickly shifts from being a symbol of freedom to a barrier to mobility. As a result, getting a broken car back into running condition tends to be a top priority for vehicle owners. That's where Genuine Parts comes in. The company behind NAPA Auto Parts stores, Genuine Parts plays a key role in helping people get their cars back on the road.
The older cars get, the more likely they are to break down, and people tend to keep their cars longer when the economy is bad. That combination gives Genuine Parts a natural buffer against tough economies. It's a key reason why the company has been able to pay a dividend consistently since 1948 and reliably increase that dividend for a whopping 66 consecutive years.
On top of that outstanding dividend profile, Genuine Parts trades around a reasonable 19 times its anticipated forward earnings. When combined with a modest projected growth rate that gives reason to believe it can continue to raise its dividend, that looks like a reasonable price to pay for a company with so much going for it.
Put it all together, and Genuine parts looks like the kind of reliable, affordable, and consistently giving company that would make a great gift for my long-term valentine.
For better, for worse, for richer, for poorer
While they all operate in vastly different business lines, Genuine Parts, Walt Disney, and Digital Realty trust all have key characteristics that make them potentially decent as long-term holdings. Of course, as with any relationship, for it to last for the long haul, there needs to be compatibility across both parties. So take the time today to see if there's a potential spark that might be the start of a wonderful long-term relationship. Whether it's with one of them or somewhere else, you just might find the Valentine you've been looking for.
