Wow. As I write this on Thursday, I am watching some really nice gains on the stock market. I’m talking about the likes of Docebo stock spiking 19% and Shopify stock rallying 16%. No, these aren’t the type of “forever” stocks that I don’t worry about owning, no matter what the market does. They’re riskier (perhaps even considered speculative to some investors) due to having little to no earnings.
“Forever” stocks must be ones that are stable, mature businesses that can continue to grow their profits steadily in the long run. They often provide a nice, growing dividend and better downside protection for your capital.
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RBC stock
The big Canadian bank stocks are some of the most profitable businesses on the TSX through economic cycles. And Royal Bank of Canada (TSX:RY) leads the group. Its trailing 12-month net income is more than $15 billion with a sustainable payout ratio of 43%.
I remember a pundit commenting on BNN about Shopify stock as it was falling from its peak last year; the pundit said that high-flying stocks that surpass RBC stock’s number one market cap on the TSX tend to lose that spot soon after. I don’t think anyone expected Shopify stock to fall as much as 85% from peak to trough in about a year, though.
In stark contrast, RBC stock has only declined about 1% in the last year, and from peak to trough, it was a fall of 21% — much more palatable than Shopify.
Moreover, RBC stock also offers a dividend yield of about 3.9%, which provides stable returns for investors, no matter what the market does.
Fortis stock
Another blue-chip stock you can buy and hold is Fortis (TSX:FTS) stock. Because of the essential utility services that it offers, Fortis has delivered highly defensive business performance through economic cycles. Consequently, it has also paid an increasing dividend for 49 consecutive years.
Other than getting predictable returns on its investments for being a regulated utility, the North American utility is also diversified across 10 operations in different jurisdictions.
Fortis’s 10-year dividend-growth rate is 5.9%. Its business is so predictable that management forecasts that it’ll be able to increase the dividend by 4-6% through 2027. It also starts you off with a decent dividend yield of 4.2% at $53.82 per share at writing.
Brookfield Asset Management stock
Brookfield Asset Management (TSX:BAM.A) just reported strong third-quarter (Q3) results yesterday. Its operating funds from operations climbed 30% to US$1.2 billion and to US$0.73 on a per-share basis. Its distributable earnings before realizations also increased impressively by 39% year over year to US$1.2 billion.
A higher interest rate environment has made it more challenging for businesses to access capital in the financial markets. This is not a problem for BAM, which has almost US$125 billion of capital that it can deploy to put to work.
For example, management highlighted that it “acquired 25% of a €17.5 billion German telecom tower portfolio; agreed to a $30 billion partnership with Intel for their semiconductor facility in Arizona; established an US$8 billion strategic partnership between our Transition group and Cameco to own Westinghouse Electric for the long term—while simultaneously winding up the very successful restructuring phase of our private equity group’s ownership; made US$7 billion of investments in our Transition fund; and closed on the acquisition of three real estate companies with US$9 billion of assets at deep discounts to replacement cost.”
This quarter, Brookfield’s fee-bearing capital hit a record high of US$407 billion, which is a part of its total US$762 billion of assets under its management.
The large-cap growth stock rallied 8.57% on strong third-quarter results and a positive market yesterday, but it remains a good buy for long-term investors with a tilt towards growth. You can have peace of mind knowing that it is a proven business with a track record of delivering long-term returns of 12-15% on its investments.
The Foolish investor takeaway
You aren’t going to become wealthy overnight with these “forever” stocks. However, they can help stabilize your stock portfolio and grow your long-term wealth without you being a bundle of nerves.
