You may find yourself with a little extra cash around now thanks to an end-of-the-year bonus -- and the possibilities of what to do with it are endless. One particular choice, though, could actually grow that money into a whole lot more. I'm talking about investing. If you invest in a variety of solid companies over time -- at least five years -- you could see the amount of your bonus multiply.
So, which stocks should you choose? It's a great idea to go with companies that have demonstrated earnings strength over time -- and remain leaders in their markets so they may continue growing earnings into the future. You also should consider stocks that pay dividends, to offer you passive income every year. Finally, you'll want to look at valuation and choose stocks that are reasonably priced right now.
Ready to get started? Let's check out five top stocks that could grow your bonus over the long run if you buy today.
Image source: Getty Images.
1. Abbott Laboratories
Abbott Laboratories (ABT 0.63%) is a healthcare giant with four solid businesses: diagnostics, medical devices, established pharmaceuticals, and nutrition. This is a plus because if one day a particular business faces headwinds, the other units may compensate.
Here's a recent example: During earlier days of the pandemic, Abbott's leadership in coronavirus testing brought in billions of dollars, but today, testing demand is on the decline. Still, the company's strength in other areas helped it generate double-digit sales growth in the third quarter -- and report $10 billion in sales. Excluding coronavirus testing, each of the four units reported double-digit sales increases.
You'll also like Abbott for its dividend growth. As a Dividend King, it's lifted its payment for more than 50 consecutive years. That suggests rewarding shareholders is important to the company so it's likely to continue on that path.
Today, Abbott shares trade for 24 times forward earnings estimates, a very reasonable price for this blend of passive income and earnings strength.
2. Coca-Cola
Coca-Cola (KO) is another Dividend King that you'll want to add to your portfolio. The company has the free cash flow -- at more than $10 billion -- and the earnings power to support ongoing dividend increases. And, as with Abbott, it's clear this long track record of dividend growth shows the company is committed to sharing its successes with shareholders.
Speaking of earnings, even in tougher times, the world's biggest non-alcoholic beverage maker has managed to raise prices and increase revenue. In the most recent quarter, revenue and net income climbed -- and the company lifted its full-year revenue forecast. This is thanks to Coca-Cola's solid brand, which serves as its moat or competitive advantage. Fans of the company's eponymous drink and its other popular brands such as Minute Maid juices keep coming back and won't easily switch to the competition.
Today, Coca-Cola shares trade for 21 times forward earnings estimates, a great price for this market giant that you'll want to hold on to for the long haul.
3. Johnson & Johnson
I've got one more Dividend King for you: healthcare powerhouse Johnson & Johnson (JNJ -0.46%). The company, like the two above, has made dividend payments a priority and recently reiterated its commitment to dividend growth.
Right now is a particularly interesting time to invest in J&J because, earlier this year, the company made a major move to spur growth. J&J spun off its slower-growth consumer health business so that it can focus on its two higher-growth businesses: pharmaceuticals and medtech. It collected more than $13 billion from the operation -- that could come in handy to support internal pipeline growth or to acquire external programs.
J&J recently said it aims to launch more than 20 new therapies and 50 product expansions by 2030 -- and the company expects to have more than 10 products with peak year sales potential of $5 billion or more.
Today, J&J shares trade for 15 times forward earnings estimates, a steal for this healthcare leader as it heads into a new era of growth.
4. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX -0.06%) is the global market leader in cystic fibrosis treatment, bringing in billions of dollars in earnings annually. This leadership is likely to last through the late 2030s thanks to its current blockbuster, Trikafta, and potential new products on the horizon.
On top of this, Vertex is expanding into other areas. The company and partner CRISPR Therapeutics recently scored a win when they received regulatory approval of Casgevy, their gene-editing treatment for blood disorders. The product has blockbuster potential and also demonstrates that Vertex has what it takes to expand beyond one treatment area. And here, there's more to come. Vertex's pipeline is strong, and the company now is wrapping up a pivotal program in the very promising area of pain management.
Even though Vertex shares have climbed this year, the stock trades for only 26 times times forward earnings estimates -- a reasonable price considering forecasts for double-digit annual growth over the coming five years.
5. Apple
Apple (AAPL -0.35%) has grown earnings over the years thanks to consumers' love for its must-have products like the iPhone and Mac. And this brand strength is Apple's moat -- iPhone fans are unlikely to forgo the latest version and opt for another brand. This loyalty should help the company continue to post revenue gains well into the future.
And this loyalty has also helped Apple create a second revenue stream beyond just selling its devices. Apple now can generate more and more revenue through sales of services to device owners. The company this year reached more than 1 billion paying subscribers, and this helped Apple report record-high services revenue in the most recent quarter. By services, I mean everything from digital content to iCloud storage.
Apple shares advanced this year, but they're still trading for only 30 times forward earnings estimates -- a reasonable level for this top tech company as it heads into a new era of growth led by services strength.
