As Warren Buffett said: “If you aren’t willing to own a stock for 10 years, don’t even think of owning it for 10 minutes.”
But why stop at 10 years? Why not 30 years, or 50 years? Heck, why not 100 years?
After all, if a company is going to thrive over the next century, it will have to possess certain qualities: a strong financial position, wide competitive moat, an essential (or at least highly desirable) product or service and an ability to create shareholder value in good times and bad. In other words, thinking long-term can help you identify desirable investments and avoid risky ones.
With that, let’s throw it over to our panel of experts, each of whom was asked to pick one – and only one – dividend stock for the next century. We’ve edited their comments for clarity and space. (A hat tip to investor website The Motley Fool, where we got the idea for this story).
Andrew Hallam, author of the forthcoming Millionaire Teacher
Pick: Coca-Cola Co. KO-N
It’s a simple business that won’t excite too many people, but its stock price will steadily rise with its profits. Coca-Cola’s advertising signage (which costs the company nothing, in many cases) can be found everywhere from Shanghai to Morocco’s Dades Gorge. The average North American has never heard of most of Coca-Cola’s products; more than 3,500 drinks are under their label. With most people in India and China still living in Third World conditions, their future prosperity will bode well for Coke. When a promising new competitor comes along, Coca-Cola often buys them, outright, with cash from their very deep pockets. And that new drink becomes part of their monstrous distribution and advertising network. Nobody is going to usurp Coke (or Pepsi) as the world’s top two drink brands. Rich and poor alike will be embracing Coca-Cola products for another hundred years, at least.
Christopher Varley, art dealer and dividend growth investor
Pick: Colgate-Palmolive Co. CL-N
Colgate-Palmolive generates more than 60 per cent of its sales outside the U.S., and controls more than 44 per cent of the world’s oral hygiene market. It is a virtual monopoly in some countries. Colgate’s stock price is always a bit “expensive” – it trades at high price-to-book and price-to-earnings ratios. But it has high return on equity, an attractive profit margin, and manageable – and well-managed – debt.
Colgate has paid dividends since 1895, and has doubled its dividend on average every eight years since 1979. The current yield is only 2.7 per cent, but my yield based on the price I paid for the stock is significantly higher, and the dividend payout ratio is a sustainable 48 per cent. I believe that this is a dividend-paying equity that one can buy and hold “forever.”
Lyle Stein, chief executive officer, Leon Frazer & Associates, and manager of the Horizons AlphaPro Dividend ETF
Pick: Enbridge Inc. ENB-T
Leon Frazer has owned Enbridge for 60-plus years and we will continue to own it because we like the fundamental infrastructure nature of the pipeline business. They have the ability to put pipe in the ground at what today is probably the lowest cost of capital in the business, and that’s a huge competitive advantage. The total return, including dividends, over the last 60 years is 9.5 per cent annually.
The global transportation system today is significantly linked to carbon-based fuels, which today are reasonably priced. Obviously, the risk to any energy transporter is a rise in the price of energy, because alternatives can potentially emerge. All I know is that people forecast the end of the oil business back in 1972 but companies are still looking for oil today.
Robert Cable, director, wealth management with ScotiaMcLeod and author of Investing on Autopilot
Pick: Atco Ltd. ACO.X-T
The largest and longest-lasting energy deposit known to man currently is Alberta’s oil sands, and there will be an ongoing need to exploit these massive deposits that should last far more than 100 years. Atco is extremely well-positioned to benefit from the oil sands development as the company provides services to utilities and energy companies, in addition to supplying structures and logistics. Atco is not just a local company; it operates on six continents. It has regulated operations that offer consistent, stable returns as well as non-regulated ones that offer the ability for above-average growth in earnings.
