Most people don't want to work in their golden years. And while some programs provide financial benefits to retirees, such as Social Security, these programs are generally not meant to completely replace income from a job. That's why it's essential for individuals to save for retirement themselves and to start doing so as early as possible.
One of the best ways to do that is by investing in stocks that offer important goods or services that aren't likely to go out of style anytime soon, have long-term growth opportunities, and can provide solid returns over 20 years or more. Let's look at two companies that can deliver on that front over the long run: Abbott Laboratories (ABT 0.03%) and Visa (V -0.48%).
1. Abbott Laboratories
The healthcare industry is constantly changing, but the services companies in this sector offer never go out of style. Abbott Laboratories is a healthcare giant specializing in medical devices, although it also has a hand in pharmaceuticals, nutrition, and diagnostics. One of Abbott's greatest strengths is its ability to innovate, so it doesn't get left behind by new technologies.
One of the company's key growth drivers is its FreeStyle Libre franchise, a portfolio of continuous glucose monitoring (CGM) systems for diabetes patients to keep track of their blood glucose levels. CGM technology is a major innovation since it doesn't rely on painful fingersticks and can make more measurements throughout the day, often leading to better patient health outcomes.
Abbott Laboratories is one of the leaders in CGM, a market that will likely continue growing for years given its relatively low worldwide penetration among the 422 million diabetes patients globally. Examples of Abbott's innovative capabilities abound, and they include the company quickly developing coronavirus diagnostic tests in the heat of the pandemic.
Even though the company's operations were disrupted during much of the outbreak, leading to slightly inconsistent financial results, Abbott Laboratories continues to make headway. In 2022, the company's revenue increased by 1.3% year over year (or 6.4% in constant currency) to $43.7 billion. Abbott's earnings per share climbed by 2.5% to $5.34.
And Abbott's top and bottom lines, as well as its free cash flow, have generally been on an upward trend over the past decade.
ABT Revenue (Quarterly) data by YCharts.
The company's results should continue to improve in the long run as it develops more products and the need for healthcare services increase because of the world's population aging.
Here's one more reason why Abbott Laboratories is an excellent stock to buy and hold: The company has raised its payouts for 51 consecutive years, which makes it a Dividend King. And with a cash payout ratio of just 42.4%, there is plenty more room for increases. Opting to reinvest dividends is a great idea for those saving for retirement, since it can help significantly boost total returns.
All these factors make Abbott Laboratories an excellent stock for patient investors saving for retirement.
2. Visa
Visa operates of the largest payment networks in the world, where it helps facilitate credit card transactions. The company makes money through the various transaction fees it charges financial institutions. Several aspects of Visa's business make it an excellent stock for the long run. First, Visa's payment network is already established and boasts a vast ecosystem of financial institutions, consumers, and businesses.
That grants Visa's operations a network effect, or when the value of a service increases with use. Visa is likely to remain a top player in this field for a while, which is essentially a duopoly it shares with Mastercard. Second, Visa's revenue will grow as more transactions switch from cash and check. And although credit cards seem ubiquitous these days, there is arguably a long runway for growth here.
The company estimates that there are still trillions spent via cash and checks every year. In the first quarter of its fiscal year 2023, ending on Dec. 31, Visa's total payment volume of about $3 trillion increased by 2% year over year (7% in constant currency). The company's net revenue of $7.9 billion jumped by 12% compared to the year-ago period. And its net income came in at $4.2 billion, 6% higher than the prior year's quarter.
Visa's results have generally been solid as well when looking at a longer timeframe.
V Revenue (Quarterly) data by YCharts.
Third, Visa boasts excellent margins. With an already established payment network, additional transactions don't lead to significantly higher operational costs.
V Profit Margin data by YCharts.
Profit margins of around 50% for a company of this size are impressive. Last but not least, although not a Dividend King, Visa is also an excellent dividend-paying stock. The company has raised its payouts by 445.5% over the past decade and currently boasts a highly conservative cash payout ratio of 18.8%. Visa can perform relatively well regardless of economic conditions, so it is unlikely to suspend its dividend payments anytime soon.
That, combined with a strong competitive edge and a long runway for growth, makes Visa an excellent forever stock.
