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3 magnificent stocks that I will “never” sell
I hate to say I will never sell a stock because you never know what life will bring. However, there are a few businesses that I own that I can comfortably say that I hope to pass them on to my daughter someday (hopefully many years from now).
Three of those forever stops include Real estate income (NYSE: O), Procter & Gamble (NYSE: PG), and Hershey (NYSE: HSY). That’s why I like each of them so much.
1. Realty Income is a slow-growing giant
Realty Income has a dividend yield of about 5.6% right now, which is near the highest levels of the last decade. The shares look reasonably attractive now. But there’s more to like than just a high yield, including three decades’ worth of annual dividend increases and the real estate investment funds (REIT) balance sheet with investment grade rating.
That said, it’s the core business that I really appreciate. Realty Income is the largest net lease REIT you can buy (a net lease requires the tenant to pay most of the operating costs at the property level). It has a globally diversified portfolio of predominantly retail properties with a smattering of industrial assets.
Realty Income’s enormous size (it owns over 15,400 properties) and financial strength allows it advantageous access to capital markets, giving it an edge over its peers when it comes to raising capital. Meanwhile, a low cost of capital allows the company to bid aggressively for properties and still make a profit. It can also take on larger businesses than its peers, including acting as a sector consolidator.
In short, slow and steady growth is the norm here, and I’m happy to own it, making a great return year after year.
2. Procter & Gamble proves its worth every day
Procter & Gamble has a yield of around 2.4%, which is not as attractive as Realty Income’s yield. That being said, I bought the consumer goods giant when it was out of favor and yielding close to 4%, so I have some nice capital gains. But I have no plans to sell the shares, noting that they are financially strong (investment grade) and a Dividend King, with 68 years of annual dividend increases.
The big story about P&G, as most people call it, is that it focuses on innovation to support its portfolio of industry-leading and mostly upscale brands. Basically, the company works hard to ensure that the extra cost of its products is justified by the value they offer. And, given its vast scale, it has the ability to invest heavily in the research and development, distribution and advertising necessary to ensure customers get the best product.
The story continues
In short, it is a valuable partner to the retailers it serves because P&G products appeal to customers. As long as you continue to follow this core approach, there is no reason to sell.
3. Hershey is a beloved treat maker
I spent years watching Hershey stock, waiting for a chance to buy it. Well, that chance only came about thanks to concerns about new weight-loss drugs and soaring cocoa prices. The stock’s dividend yield is about 2.6%.
That may not sound exciting, but it’s near the high end of Hershey stock’s historical yield range. I wouldn’t call it a screaming buy, but I would say it’s attractively priced. The dividend has been increased annually for 15 consecutive years, with an annualized increase rate of nearly 10% over the past decade.
The food company makes most of its money from chocolates and other sweets, but it also makes snack foods like popcorn and pretzels. There are two paths to long-term growth as Hershey looks to increasingly expand its reach beyond the U.S. market into the confection space and expand its relatively new savory snacks platform.
As for cocoa, prices are likely to stabilize over time and, so far, consumers have been willing to pay higher prices for their chocolates. New weight loss drugs are a bigger problem, but I believe this too will pass – people like chocolate too much for me to believe this company’s most important business is in danger in the long term.
Two to buy and one to watch
If you’re looking for a stock to buy now, Procter & Gamble won’t be the best option on this list. But it’s an industry leader that you should probably put on your wish list in case there’s a broad sell-off in the market. Realty Income and Hershey, on the other hand, look attractive right now. Realty Income will be more attractive to yield seekers, while Hershey will likely please dividend growth investors.
Should you invest $1,000 in real estate income now?
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Reuben Gregg Brewer has positions at Hershey, Procter & Gamble and Realty Income. The Motley Fool has positions and recommends Realty Income. The Motley Fool recommends Hershey. The motley fool has a disclosure policy.
3 magnificent stocks that I will “never” sell was originally published by The Motley Fool