Forever is a long time, especially in business.
History is full of firms that were once the talk of the investment world. In time, many have fallen into bankruptcy or irrelevance.
Eaton’s, Nortel Networks, Sam the Record Man — these companies were once leaders in their industries. Today, they’ve all been sent to the dustbin of history.
How do you know which stocks can be held forever? Which firms are bound to disappear? There are no hard and fast rules, but these guidelines will help you decide.
- The firm is a leader in its industry.
- The firm provides a timeless product or service.
- The firm is protected by a strong competitive advantage.
- The firm has a long history of shareholder friendly actions.
The first bullet is actually the least important. The business blow-ups mentioned above were once industry champions. However, when combined with the other three points, you get the true markings of quality.
You may notice tech companies absent from the list below, and for good reason. These businesses tend to have short life spans. Those that survive do so by adapting. But for every one that manages to transform itself, hundreds of others fall victim to change.
Likewise, you won’t find other industries such as retail, airlines, and newspapers. These businesses may be attractive investments from time to time. However, they fail to earn big returns on capital year after year.
Few stocks passed these strict standards. But a couple of companies managed to squeeze by. Here are the five best dividend stocks for the long haul.
George Weston Limited (TSX: WN): Our needs don’t get much more basic than food, drink, and hygiene. George Weston is one of the oldest food manufacturers in Canada. This recession-proof business has paid a dividend to shareholders every year since 1930.
Brookfield Asset Management (TSX: BAM.A)(NYSE: BAM): Brookfield holds some of the most valuable infrastructure monopolies around in the world. The company owns toll roads in South America, railroads in Australia, timberland in the United States, and real estate throughout Canada. Because these assets are mostly regulated, Brookfield’s revenues are almost completely locked in.
Enbridge Inc. (TSX: ENB)(NYSE: ENB): Enbridge owns oil pipelines and terminals across North America. This business is so steady, its cash flows resemble bond coupons. That’s why Enbridge has never missed a dividend payment since 1953.
Royal Bank of Canada (TSX: RY)(NYSE: RY): In Canada, the top seven banks control almost all of the nation’s deposits. That makes it almost impossible for small players to compete. Without much in the way of rivals, firms like Royal have been able to earn juicy, oversized profits year after year.
Canadian Pacific Railway Limited (TSX: CP)(NYSE: CP): In the next 50 years we’ll have more people living in this country. Over that time, they’re going to demand an ever increasing number of goods. Because the firm’s network of track is almost impossible to replicate, CP will play a big part in moving those products around the nation.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Robert Baillieul has no position in any stocks mentioned.