These seven stocks are great long-term holdings.
Amid high inflation, rising interest rates and supply chain shocks, investors have been scrambling to find assets capable of producing gains in the current market conditions. Commodities, precious metals and real estate tilts in portfolios have all become popular recently, given the losses suffered by stocks so far in 2022. However, it’s worth remembering that many of the great investors — perhaps Warren Buffett being the most prominent — endorse buying the stocks of great companies and holding them forever. Investing in the stock of a blue-chip company with quality products or services, a strong economic moat, excellent management and sound financials is a good way to build long-term wealth. Therefore, instead of timing the market or chasing trends, investors should focus on building positions in the stocks of great businesses. Here are seven of the best long-term stocks to buy in 2022.
McDonald’s Corp. (ticker: MCD)
America’s most famous fast food chain is an excellent long-term consumer defensive holding. With over 36,000 corporate and franchise restaurants in operation worldwide, McDonald’s has achieved an extremely strong competitive position and network effect, giving it great longevity and resilience even in the worst economic conditions. With excellent revenue, operating margins and free cash flow, McDonald’s manages to continually deliver shareholder value and consistent returns. The company recently posted diluted earnings per share growth of 18.9%, pointing to its ability to still grow and adapt in the modern fast food industry. The company shows an ability to innovate, with its increasing adoption of automation, new technology and globally diversified menu offerings. With a current dividend yield of 2.2% and a five-year beta — a measure of correlation with the broader market — of 0.61, McDonald’s is an excellent low-volatility blue-chip stock that can anchor your investment portfolio for decades.
Walmart Inc. (WMT)
Walmart is the undisputed king of American retail. Its size, low prices and broad offerings give it a strong competitive advantage. Thanks to its ever-expanding presence, Walmart has been able to maintain its margins and continually reinvest profits into its business. Walmart operates 11,700 retail stores in 28 countries, with a growing e-commerce presence and stakes in other online retailers. As a consumer defensive stock, Walmart is a great buy during recessions, as its business model allows it to almost always have customers lined up. With a five-year beta of 0.55, Walmart is an excellent low-volatility long-term stock. Walmart also pays a dividend yield of 1.5%. The five-year growth of that dividend has been strong at 10%.
Johnson & Johnson (JNJ)
Walk into any drugstore, and you’ll instantly spot a variety of health care products on the shelves from Johnson & Johnson. As one of America’s largest diversified health care products providers, Johnson & Johnson has been a mainstay in the economy, with its consumer health, pharmaceuticals and medical device products leading the way in sales. Popular consumer health product brands include Band-Aid, Listerine mouthwash, Visine eyedrops, Aveeno lotion, Neutrogena face wash, Neosporin ointment, Benadryl allergy medication and Sudafed congestion medicine. In the medical devices segment, Johnson & Johnson sells catheters, hip and knee replacements, blood glucose monitoring equipment, and surgical tools. The essential nature of its products allows Johnson & Johnson to maintain excellent fundamentals, with impressive net profit margins of 22.3%. The stock pays a healthy dividend yield of 2.3% with a sustainable payout ratio of 53.1%.
Verizon Communications Inc. (VZ)
One of America’s most oligopolistic industries — defined by dominance by a small number of companies — is the telecommunications sector, and its undisputed king is Verizon Communications. With an iron grip on wireless, wireline and broadband communication services, Verizon has enjoyed a strong economic moat for decades. With expansions into hardware sales of smartphones and computers, as well as networking for businesses such as cloud services and cybersecurity, Verizon has further solidified its competitive advantage. The company trades at an attractive valuation, with a low price-earnings ratio of about 10. What’s most attractive about Verizon for investors is its high dividend yield, which sits at 4.8% with a sustainable payout ratio of 47.4%. Couple this with excellent fundamentals like a 29% return on equity, and you have what is indeed an excellent long-term buy-and-hold stock.
Costco Wholesale Corp. (COST)
Imagine a warehouse store where you can buy practically anything — including groceries, health and beauty products, hardware, appliances, electronics, furniture, jewelry, furniture, gas, and even mortgages — at a lower cost than other retail outlets. Sounds great, right? Well, just head to your local Costco and sign up for a membership. Costco has an extremely strong economic moat. After all, how can rival companies compete with its immense line of offerings, excellent customer service and low prices? This winning combination has made Costco a highly profitable company over the last decade, with revenue of $50.9 billion last quarter and earnings-per-share growth of 36%. While the dividend yield of 0.5% is small, five-year dividend growth stands at 75.56%. Holding this stock for the long term could therefore be a great dividend growth play, as well.
3M Co. (MMM)
Whether it’s sticky notes, tape, air filters, bandages or respirators, 3M has pretty much produced it all. Since its founding in 1902, 3M has become a global titan in the manufacturing sector, offering consumer electronics, health care, communications, transportation and safety products. It also produces essential parts for other industries, such as foil, vinyl, polyester, sealants and electronic components. Having established itself as a cornerstone of American industry, 3M enjoys strong financials and pays a high dividend yield of 4% with a sustainable payout ratio of 58%. This relatively low-volatility stock continually spits out cash, year after year.
Coca-Cola Co. (KO)
As one of America’s most popular beverage companies, Coca-Cola offers more than 4,100 drinks across 500 well-known brands such as Coca-Cola, Diet Coke, Coca-Cola Zero, Sprite, Fanta, Minute Maid and Powerade. Its brand power isn’t limited to just America, though. With sales in Europe, the Middle East, Latin America, Asia Pacific and Africa, Coca-Cola is a globally recognized brand beloved by consumers of all cultures. This was achieved by its network of 250 bottling companies, 900 productive plants and 27 million retail outlets. As a mainstay in Warren Buffett’s portfolio for decades, Coca-Cola has excellent fundamentals, and the stock also pays a respectable dividend of 2.8%.
7 best long-term stocks to buy now:
— McDonald’s Corp. (MCD)
— Walmart Inc. (WMT)
— Johnson & Johnson (JNJ)
— Verizon Communications Inc. (VZ)
— Costco Wholesale Corp. (COST)
— 3M Co. (MMM)
— Coca-Cola Co. (KO)
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7 of the Best Long-Term Stocks to Buy originally appeared on usnews.com
Update 04/07/22: This story was published at an earlier date and has been updated with new information.
