When you look at the most successful stock investments of all time, you'll find a common theme behind all of them. In every case, smart investors bought into the stock before or during a period of explosive growth for the company. Over the years, as the company grew its sales and earnings, the share price moved inexorably higher. Those who went the distance without letting the inevitable gyrations of the stock market coax them into selling their positions earned great rewards.

In that light, you might wonder if there's ever any place in your portfolio for stock in a company that isn't growing anymore. After all, if the best days for a company are long gone, isn't owning shares the same thing as riding a sinking ship all the way down?

The value of growth
If this argument sounds familiar, that's because it's at the core of one of the most fundamental arguments among investors. Growth investors believe that companies with the best prospects for higher earnings in the future make the best investments, because if they succeed, their share prices will rise to mirror that success. Of course, their higher risk means that in many cases, these companies won't succeed in sustaining fast growth rates, which can create big disappointments for shareholders.

In contrast, value investors point to the excessive valuations that growth followers often pay for hot stocks. Instead, value investors stick with less exciting stocks that have much lower growth rates but which also carry much cheaper multiples to their earnings. By paying less for shares, they hope to make up for the slower growth their companies have.

But where both growth and value investors would agree is that the best stocks will always enjoy at least some growth. After all, a contracting business is a dying business, and unless the market puts an extremely low valuation on such a company's stock, it'll be hard to justify buying it.

Are these companies heading down?
Fortunately, there aren't that many companies among the blue-chip S&P 500 Index that analysts see facing falling earnings in the coming years. But there are a few, and if you have any of them in your portfolio, it's worth asking yourself whether you're prepared for the ramifications of what reductions in net income would mean to the value of your shares.

Here are the 10 biggest stocks that are expected to see earnings declines over the long haul:

Stock

Median Expected Long-Term Growth Rate

Current P/E

Dividend Yield

Eli Lilly (NYSE: LLY) (7.1%) 7.9 5.7%
Exelon (NYSE: EXC) (4.3%) 10.1 5.3%
Sprint Nextel (NYSE: S) (2.5%) NM 0.0%
Forest Labs (NYSE: FRX) (2.0%) 15.3 0.0%
Frontier Communications (NYSE: FTR) (2.5%) 43.3 8.2%
Ameren (NYSE: AEE) (5.8%) 41.8 5.3%
XL Group (1.4%) 19.4 2.0%
Windstream (Nasdaq: WIN) (0.8%) 19.4 7.6%
Wyndham Worldwide (1.6%) 14.4 1.7%
Pitney Bowes (4.0%) 13.4 6.5%

Source: Capital IQ, a division of Standard & Poor's.

A quick look at these companies doesn't reveal any obvious pattern. But if you dig a bit deeper, some categories of stocks become more evident:

  • With some high-dividend, low-growth stocks, investors clearly expect to reap the bulk of their returns from collecting dividend checks. For instance, with rural telecom companies Windstream and Frontier, whose bread-and-butter landline business could the 21st century equivalent of the buggy whip, all their shares have to do is tread water in order for shareholders to get a strong return.
  • In other cases, high dividends and slow growth combine with low valuations to reveal uncertain futures. Lilly is a great example here; as with most big pharma stocks, coming patent expirations and the need to continually develop its pipeline raise grave doubts about how it will meet future challenges. For now, it's fine and can pay a good dividend, but what the company will look like five years from now is anyone's guess. Forest Labs is in a similar situation, although it doesn't have the dividend to bolster its shares. Utilities Exelon and Ameren are in much the same boat, as changing regulatory environments make it hard to predict future growth.
  • On the other hand, some stocks have such high valuations that investors are evidently hoping for an unexpected event to bail them out. With Sprint, for instance, an expected turnaround never surfaced, and it may well be that the only thing holding up share prices is the hope of a possible takeover bid by a competitor.

Don't get trapped
In rare cases, stocks that have stopped growing can still be decent investments. But most of the time, you can find better places to put your money. If a company you own has seen its past growth stop in its tracks, make sure you're utterly convinced it's a good investment before you decide to stay on board for the long haul.

Don't get stuck with second-rate stocks. Click here to get The Motley Fool's free report, 5 Stocks the Motley Fool Owns ... and You Should, Too.

Fool contributor Dan Caplinger sees the fastest growth from his 5-year-old daughter. He doesn't own shares of the companies mentioned in this article. Motley Fool Options has recommended writing covered calls on Exelon, which is a Motley Fool Inside Value recommendation. Sprint is a former Inside Value pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy keeps growing and growing and growing....