There are many advantages to holding stocks for a long time -- think five years or more. First, doing so allows the power of compounding to work its magic. Second, in some countries like the U.S., there are tax advantages associated with it. Of course, none of that means much unless investors buy shares in outstanding companies that can deliver excellent returns over long periods.
And with the right corporations, it might even be worth remaining a shareholder for life. That said, let's consider two companies that are great "forever" candidates: Pfizer (PFE -0.08%) and Apple (AAPL -0.17%).
1. Pfizer
In 2022, Pfizer recorded $100.3 billion in total revenue, representing a 23% year-over-year increase and an all-time annual high for the drugmaker. Pfizer can thank its coronavirus products, Comirnaty and Paxlovid, for this performance. However, we are no longer in a state of emergency, and Pfizer's coronavirus sales will drop starting this year, leading to a massive decline in total revenue.
For its fiscal 2023, Pfizer expects revenue in the neighborhood of $69 billion. That shouldn't trouble investors. In 2020, the last year before it started recording sales of its coronavirus vaccine, the pharma giant's top line was $41.9 billion. So the company should keep delivering results above its pre-pandemic levels. Pfizer expects non-coronavirus revenue of $70 billion to $84 billion by 2030.
That's because Pfizer is on the verge of significantly rejuvenating and expanding its lineup. Over the next 18 months, the company expects 19 new approvals or label expansions for key products. There should be at least 10 brand-new approvals for the company in this period. They will likely include a potential respiratory syncytial virus vaccine that could be the first of its kind, and a medicine for alopecia.
But Pfizer won't stop there. The company is looking to pour even more money into research and development (R&D), with a plan to increase R&D spending by at least 8.7% year over year in 2023, bringing its total to between $12.4 billion and $13.4 billion. Over the long run, that should allow the company to develop newer and more effective drugs while it continues to grow its revenue and earnings.
In addition, Pfizer is a solid dividend stock. The company has raised its payouts by a respectable 20.6% in the past five years while it boasts a modest cash payout ratio of 38.2%, giving it ample room for many more dividend increases. Pfizer looks like a solid "forever" stock with the dividends it offers, its track record of innovation, and its long-term growth potential.
2. Apple
Apple failed to impress investors with its latest update for its fiscal 2023's first quarter, which ended on Dec. 31. The company's revenue dropped by 5% year over year to $117.2 billion. On the bottom line, the tech giant's net earnings per share dropped to $1.88, down from $2.10 reported in the comparable period of the previous fiscal year. No doubt, economic problems contributed to Apple's poor performance.
But there is some good news, too. Apple reported that it now has an installed base of more than 2 billion users across its active devices. That's a massive ecosystem that arguably represents the company's future. As things stand, Apple's services segment still accounts for a relatively small fraction of its total revenue. The company's service revenue rose 6.4% year over year to $20.8 billion in its first quarter.
But that could change as it finds new ways to monetize these users. Apple could do so by ramping up its fintech ambitions, among other potential avenues. But what's important is that although it has developed and marketed innovative hardware devices, the company's future doesn't just depend on its ability to continue selling its iPhone. The great thing about Apple's services segment is that it's hard to leave the company's ecosystem.
Apple's devices boast many useful interconnected features that provide an incentive to buy and keep a suite of Apple products as opposed to purchasing an Android phone that cannot interact with an iOS tablet the way an iPhone can. Also, switching to a competing operating system requires transferring media files, a tedious task no one wants to do. Apple's high switching costs partly explain why it has continued to grow its user base.
Further, the company's services unit typically records much better margins than its hardware business. In my view, Apple has only scratched the surface of the market available to it when it comes to monetizing its ecosystem. This opportunity will allow it to generate solid and growing revenue, earnings, and margins for a long time. That's why the company remains a solid stock even at a market capitalization above $2 trillion.
