Sometimes, we want the easy ones.
Sure, it's fun to put time into digging up information on little companies Wall Street hasn't caught on to yet, and it can be very profitable, too. Lots of Fools have made big bucks buying tech or pharma startups and riding their picks to success.
But sometimes, we don't want to do all that work. My sister recently asked me to suggest some "no-brainer" stocks, stocks she could put in her IRA and not have to worry about. She's a lawyer who once worked at an investment bank -- she certainly knows how to do the research. But right now, for this particular account, she doesn't want to put the time in.
Like lots of folks, right now she wants companies everybody understands, companies she doesn't have to lose sleep over. The easy ones.
The good news is that some of the easy ones can be really profitable.
Sometimes, the obvious answer is a really good one
Just about everyone has heard of Philip Morris International
You might not want a cigarette company in your portfolio, but hang with me for a minute -- there's an important point here. Love it or hate it, a well-run tobacco business is exactly what the next great biotech start-up isn't -- stable, cash-rich, profitable through good economic times and bad. Philip Morris International isn't ever going to have a 50-bagger's vertical growth, but it's a cash flow monster -- steady growth from $4.4 billion in free cash flow in 2005 up to more than $8 billion in the past 12 months. And it's got one other big thing going for it: a 4.3% dividend yield.
Sure, 4.3% doesn't sound like much when compared to that mythical 50-bagger. But it's right in front of us for the taking, and the nature of the company's business suggests that it should be able to sustain those dividends through good times and bad. And as it turns out, Philip Morris (again, like its parent, Altria) has a history of raising its dividends every year. That, in turn, will tend to drive the stock price up over time -- there are always plenty of investors willing to pay for yield, particularly when interest rates are low, as they are now.
Philip Morris International has only been around for a few years, but $10,000 invested in Altria 10 years ago would be worth more than $57,000 now, assuming that you had reinvested the dividends -- through the dot-com wreckage, the real estate bubble, and the banking crisis of 2008. That's much better than you would have done in an index fund.
"Boring"? Maybe. The thing is, there are lots of other "boring" stocks like these -- easy picks that can do very well for you over time.
Great stocks are right in front of you!
What if we'd put that hypothetical $10,000 in McDonald's
Got Kleenex? I'm fond of saying that toilet-paper kings Kimberly Clark
Want more? Just look around. PepsiCo
I could go on and on, but it'd make my editor grumpy. But you get my point: There are easy answers -- good easy answers -- to the what-to-buy question all around us.
The magic of dividends in your IRA
Dividend stocks held in a taxable account can have frustrating effects on your tax bill, but they're ideal for an IRA, where those reinvested dividends can compound without interference from the IRS. And as we've seen, some of the biggest-name dividend stocks -- companies that you won't struggle to understand, and that shouldn't keep you awake at night -- can pile up impressive returns over time.
Looking for more ways to shore up that IRA? Dan Caplinger has 6 stocks that could save your retirement.
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Fool contributor John Rosevear has no position in the companies mentioned. Coca-Cola is a Motley Fool Inside Value recommendation. Philip Morris International is a Motley Fool Global Gains pick. Kimberly Clark, Coca-Cola, and PepsiCo are Motley Fool Income Investor recommendations. Motley Fool Options has recommended a diagonal call position on PepsiCo. The Fool owns shares of Altria Group, Coca-Cola, and Philip Morris International. You can try any of our Foolish newsletter services free for 30 days. The Motley Fool has an easy-to-love disclosure policy.