For newer investors, it can be intimidating figuring out how to get started. There are thousands of stocks listed on the major American exchanges. And there are countless mutual funds, exchange-traded funds and other options as well.
So what is a good strategy for a starter stock portfolio? While past results are no guarantee of future returns, companies that have delivered for a long period have a good chance of remaining solid investments in the future. Features such as strong competitive advantages, leading brands and world-class management teams have a way of continuing to deliver consistent returns for years on end. As such, a good place to go hunting for investments is to find companies that have increased their dividends for at least 25 years in a row. This speaks to a firm’s ability to prosper in any sort of economic conditions and makes a great place for building a starter stock portfolio.
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Here are nine companies that have delivered for investors year after year:
— A. O. Smith Corp. (ticker: AOS)
— Hormel Foods Corp. (HRL)
— Roper Technologies Inc. (ROP)
— Albemarle Corp. (ALB)
— Johnson & Johnson (JNJ)
— Brown-Forman Corp. (BF.B)
— McCormick & Co. Inc. (MKC)
— Sherwin-Williams Co. (SHW)
— Stanley Black & Decker Inc. (SWK)
A. O. Smith Corp. (AOS)
A recurring theme among dividend stocks, and great long-term investments more generally, is that they tend to dominate within stable slow-moving industries. A. O. Smith is a perfect example. It has massive share in the market for hot water heaters and boilers. It’s not a glamorous business. But everyone needs hot water, and A. O. Smith naturally sees its sales increase as demand for new housing rises. With the millennial generation getting older and buying their own homes, there should be a demographic tailwind for A. O. Smith. In addition, the company has a substantial overseas business and has prospered as countries such as China have built tons of new housing in recent years. A. O. Smith faces some near-term concerns around a housing market slowdown and inflationary pressures. But demand will be fine in the long run, and shares now go for a reasonable 19 times forward earnings.
Hormel Foods Corp. (HRL)
Hormel is a leading packaged foods company focused on protein products. Hormel is most well known for its Spam canned pork product, and people might believe the company is behind the times due to that brand. Nowadays, Spam makes up only a small percentage of Hormel’s sales. The company is a leader in millennial-friendly products such as almond and peanut butters, snack nuts, pepperoni, bacon, turkey, deli meats, salsa and guacamole. The firm is also controlled by the Hormel Foundation, which runs a charitable organization. This unique ownership structure incentivizes management to focus on long-term growth of the company’s income and dividend rather than quarter-to-quarter noise. Shares have dipped in recent months around near-term inflation pressures, setting up an attractive long-term entry point.
Roper Technologies Inc. (ROP)
It’s important to include some growth equities within a balanced starter portfolio. This brings us to Roper Technologies, which is one of the few tech companies that sports a more than 25-year track record of annual dividend increases. While tech tends to be a cyclical industry prone to booms and busts, Roper’s unique business model largely sidesteps this problem. Roper manages this by owning tons of niche software applications for verticals as diverse as life insurance, K-12 school management, power plants and graphic design. As software continues to enter the workflows of virtually every industry, Roper has the opportunity to own more unique software assets that deliver growing long-term cash flows.
Albemarle Corp. (ALB)
Like Roper, Albemarle is another good growth holding. While it can make sense to stick with conservative blue chips when building a portfolio, some firms with a significant growth profile are always appreciated. Albemarle nicely fills both roles. It is a long-established materials firm that has grown its dividend more than 25 years in a row. And, with its focus on lithium, Albemarle is perfectly positioned to be a major player in the emerging electric vehicle revolution. As lithium is an integral component in vehicle batteries, demand is set to soar in coming years. Albemarle’s global footprint, with operations in America, Chile and Australia, will be a key part of that picture. And, unlike many green energy companies, Albemarle is already highly profitable and trades at less than eight times forward earnings.
[SEE: 7 Best Monthly Dividend Stocks to Buy Now.]
Johnson & Johnson (JNJ)
Johnson & Johnson is a key component of many investors’ portfolios. It’s understandable why, as the company has produced steadily rising profits and dividend payments for more than half a century. The firm’s diversification across the health care industry — encompassing pharmaceutical drugs, medical devices, and consumer health and wellness products — has served shareholders well. J&J is set to spin off its consumer health business later this year into a new company named Kenvue. This will give investors shares in both the current firm and the new Kenvue operation. For now, JNJ stock is selling at a bargain price after a decline over the past year. Shares go for 15 times forward earnings and offer a 3% dividend yield.
Brown-Forman Corp. (BF.B)
A key feature of many long-term winners is having a tremendous brand. Spirits producer Brown-Forman fits the bill. It is the maker of Jack Daniels, which is the world’s most popular whiskey. Jack Daniels is such a strong name that the company even managed to survive the Prohibition era intact. And in the modern era, Brown-Forman’s management team has managed to grow Jack Daniels around the globe, gaining significant market share in Latin America, Europe and East Asia. In recent years, Brown-Forman has made several savvy acquisitions, such as for the Herradura tequila franchise, which have supercharged the firm’s growth. Brown-Forman has delivered tremendous returns over the decades. And as alcohol is a recession-proof business, the future should be bright regardless of what happens with the economy.
McCormick & Co. Inc. (MKC)
McCormick is another leading consumer staples company that can be a core holding for newer investors. The firm is known for its spices and seasonings, and with good reason. However, there’s more to McCormick. The firm has a leading position in institutional flavors; many of the world’s leading chain restaurants rely on McCormick to provide the unique flavors and seasonings that make their menu items so irresistible. McCormick has also made big moves into the fast-growing hot sauce arena in recent years, acquiring both Frank’s Red Hot and Cholula. With younger consumers focused on unique cuisines and recipes, McCormick should have a long runway for growth. And competition is limited as the market is simply too small to support many rival spice firms, ensuring strong profit margins for McCormick.
Sherwin-Williams Co. (SHW)
In some ways, successful investing can seem like watching paint dry. A company might not be very volatile or exciting on a day-to-day basis. But, over time, a small investment can grow to create a fortune. Paints and coatings giant Sherwin-Williams is one such example, with its shares producing a jaw-dropping 4,147% return over the past 30 years through April 19. While paint might seem like a commodity, Sherwin-Williams has developed a niche by focusing on professional clients. That is to say, Sherwin-Williams is the undisputed leader with contractors, house painters and other industry professionals. This has given the company a strong recurring revenue stream and ensures that the business will grow over time. SHW stock has pulled back sharply since peaking at the end of 2021 due to worries about the housing market. Those are valid but shouldn’t deter longer-term investors from establishing a position.
Stanley Black & Decker Inc. (SWK)
Stanley Black & Decker is a leading maker of power tools and appliances. It has a decades-long track record of growth, as its dividend history suggests. There isn’t all that much competition within the space, and Stanley Black & Decker’s leading brands have driven it to ongoing success. That said, SWK stock has gotten drilled over the past year. This is due to a slowdown in sales as the boom around home maintenance and repair from 2020-21 has now ended. In addition, power tools tend to be durable goods, so people who bought equipment in 2021 probably won’t need replacement tools for a few years. That said, Stanley Black & Decker shares are off by nearly half since the beginning of 2020, which is a massive overreaction and sets up a great entry point.
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9 of the Best Stocks for a Starter Portfolio originally appeared on usnews.com
Update 04/20/23: This story was published at an earlier date and has been updated with new information.
