The key to making good barbecue is to keep things simple and resist the temptation to check it too often. That wisdom translates nicely to investing.
While you have the freedom to follow any strategy you choose, it's often far easier to build wealth than you might guess. All you need to do is pick the right stocks, hold them for a long time, and try to leave them alone unless there is a good reason not to.
Warren Buffett is famous for this idea of buying and holding fantastic stocks. But which stocks are the right ones? Companies with a history of paying and raising dividends are a great place to look. Here are three examples of what might be considered easy wealth builders.
They won't make you rich overnight, but buying and holding them can make you quite wealthy over two or three decades.
Image source: Getty Images.
1. Coca-Cola
Beverage giant Coca-Cola (KO +0.96%) dates back to the late 1800s. Since then, its legendary namesake soda has been the driving force behind a company that has become a global juggernaut. Today, Coca-Cola owns approximately 200 brands of sodas, teas, coffee, juices, water, and other beverages, and sells them in more than 200 countries.
Coca-Cola's global name recognition and vast distribution network have become competitive moats. Other companies can't get the shelf space and priority that Coca-Cola commands at stores and other points of sale. When an innovative new brand emerges, Coca-Cola often acquires it or launches an alternative that it can quickly grow by plugging it into countless sales locations worldwide.
NYSE: KO
Key Data Points
The company's steady success has produced 62 consecutive annual dividend increases, and analysts anticipate Coca-Cola growing earnings at a mid- to high-single-digit annualized pace over the long term, so that streak should continue for years to come. Owning Coca-Cola stock is a proven ticket to wealth, especially if you reinvest the dividends.
2. McDonald's
Fast-food giant McDonald's (MCD 0.38%) is central to American culture, which has helped it thrive both in the United States and abroad. Today, McDonald's has more than 44,000 locations across roughly 100 countries. The company's franchising business model generates recurring revenue from fees and royalties, making McDonald's an excellent dividend stock.
McDonald's boasts a massive, efficient supply chain that enables it to offer fast, affordable food. That has built its value-centric reputation and made McDonald's a stalwart among consumers. While people may pull back on restaurant food when money is tight, McDonald's is likely to remain a cost leader in the industry, which could actually help it capture market share during recessions.
NYSE: MCD
Key Data Points
Management has raised the stock's dividend for 49 consecutive years. McDonald's continues to expand, with goals to grow its store count to 50,000 locations by the end of 2027. Analysts estimate that McDonald's will continue to grow its earnings at a mid- to high-single-digit annualized rate, which should continue funding dividend increases for the foreseeable future.
3. Philip Morris International
It may surprise you to see leading tobacco company Philip Morris International (PM +0.63%) on this list. After all, smoking cigarettes is an increasingly uncommon habit, even if tobacco companies have managed to raise prices to offset decades of steady industrywide volume declines. Philip Morris separated from Altria Group in 2008 and sells Marlboro cigarettes in non-U.S. markets.
Philip Morris has raised its dividend annually since 2008, building on a decades-long history of increases under Altria. Philip Morris may have the brightest future of any tobacco stock due to its emerging dominance in smoke-free alternatives to cigarettes, such as heated tobacco devices and oral nicotine salt pouches. Its Iqos and Zyn brands have been wildly successful, growing to 41% of the company's total sales.
NYSE: PM
Key Data Points
Philip Morris still has plenty of tread left on its legacy Marlboro cigarette business, which currently enjoys its highest market share since 2008 at 10.9%. That, paired with the growth in smoke-free products, has analysts calling for low-double-digit annualized earnings growth moving forward. Look for the dividend hikes to continue piling up. A starting dividend yield of 3.8% makes the stock a potential cash cow for your portfolio.
