3 Evergreen Investments for Beginners

Choosing leaders from industries that consistently perform well regardless of the market conditions is one of the simplest ways of creating an evergreen portfolio.

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When you are learning how to invest, one of the first things you come across is the difference between trading and investing. Investing is comparatively long term, but not all investments are equally long term. A few are suitable for a couple of years at best, and some offer the best returns if you buy and sell them multiple times within a decade.

However, the type of long-term investment ideal for beginners is evergreen stocks. One of the easiest ways is to find well-established companies, preferably leaders, from evergreen businesses.

A utility company

Utility businesses are one of the few genuinely evergreen businesses. Utilities, especially electricity, are pretty near the top of everyone’s necessary expenses. This makes Canadian Utilities (TSX:CU) a potent evergreen choice. The company caters to two million customers in four countries (including Canada).

But it’s evergreen for another reason as well. Canadian Utilities is the oldest aristocrat in Canada and has now grown its payouts for 50 years, making it a Dividend King by the more stringent U.S. standards.

From a dividend perspective, another strong point in favor of Canadian Utilities is its yield, which is currently at 4.5%. The payout ratio is currently at about 115%, but the company has sustained its dividends through the worst payout ratios. Its capital-appreciation potential is decent enough in the long term.

A residential REIT

Real estate has always been one of the most beloved tangible investments. But it’s more than just that -, primarily residential real estate. From the perspective of “shelter,” it’s one of the basic human necessities.

So, a residential REIT like Canadian Apartment Properties REIT (TSX:CAR.UN), also the largest REIT in Canada by market cap and one of the largest by asset base, can be considered a safe, evergreen investment.

And this evergreen investment comes with its own characteristic strengths, including a decent return potential and a highly attractive price if you buy now. Its yield is usually quite low, but since the stock is trading at a 21% discount right now, you can lock in an almost 3% yield.

Its portfolio of residential properties, mostly apartment buildings and mobile home communities (affordable options), comes with reasonable security that what the REIT has to offer will almost always be relevant.

A food and medicine retailer

Metro (TSX:MRU) covers two of the few remaining necessary expenses that people prioritize spending money on: food and health (medicine). It has one of the largest grocery stores and pharmacy networks in Canada. When it comes to food, Metro has seven distinct brands under its name, each with its own geographical focus and local reach and, collectively, about 950 stores.

There are roughly 650 pharmacies under Metro’s banner (under four brands) and a used medicine/used medical sharps disposal company.

In addition to the leadership role in two evergreen industries, Metro also has a stellar dividend and a strong capital-appreciation history. And even though its yield is usually quite low, the growth potential makes up for it.

Foolish takeaway

All three companies are Dividend Aristocrats, though, ironically, dividends are the primary strength of just one (Canadian Utilities). The other two are smart investments from a growth perspective, and you can experience decent capital appreciation by adding them to your portfolio.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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