One motto I live by is, “It’s always better to be overprepared than underprepared,” and often this involves being proactive. This could apply to education, work, sports, finances, and many other life areas.
Regarding finances, being proactive is especially important when it comes to retirement savings. Sure, some Social Security benefits can help, but many people are pointing out how those are coming up short. Half of respondents in a recent Motley Fool survey say they’re considering returning to work because of low Social Security benefits.
Even if you’re 30 or so years away from retirement, it’s never too early to begin thinking about your savings plan and investments to get you where you want to be. Here are two great companies to add to your portfolio and hold on to for the next three decades.
They’re not high-flying growth stocks, but they’re as reliable as possible and can provide valuable passive income.
Image source: Getty Images.
Coca-Cola (NYSE: KO) has been around since 1892 and has been the world’s leading non-alcoholic beverage company for a good chunk of that time. If you had to name five of the world’s most recognizable brands, there’s no doubt that Coca-Cola would make the list.
When I think about investing for retirement, my mind goes to companies with above-average and reliable dividends, and Coca-Cola has both. More important than Coca-Cola’s dividend yield — which will inevitably fluctuate — are its 62 consecutive years of dividend increases.
Six decades of dividend increases is no small feat, but Coca-Cola has made it a part of its company’s DNA. In the past 30 years, Coca-Cola’s dividend has increased by close to 900%, to $0.485 per share.
KO Dividend data by YCharts.
The above works out to around a 7.9% average annual increase in Coca-Cola’s dividend. If we assume this trend will continue (with an emphasis on “assume” because there’s no way to predict it), today’s $0.485 quarterly dividend could be around $4.83 per quarter in 30 years.
The name Procter & Gamble (NYSE: PG) (P&G) may not ring bells in many households, but many of the products it sells definitely will. It owns popular brands like Tide, Pampers, Tampax, Old Spice, Bounty, and dozens of others.
Like Coca-Cola, P&G is a Dividend King, with 68 straight years of dividend increases and 134 total years of paying a dividend. Talk about consistency.
P&G is a textbook example of a defensive stock. It sells products that people buy regardless of economic conditions. You likely won’t see many quarters with double-digit percentage sales growth, but you can bet on its long-term stability.
Some would consider P&G a “boring” stock, but sometimes, boring is what you’re looking for when investing for the long haul. In P&G’s case, a better B-word would be “billions,” because that’s what it continues to generate. In its latest quarter (ended Sept. 30), P&G made $21.7 billion in revenue and $4 billion in net income.
The revenue and net income growth have been modest over the past decade, but if you’re investing in P&G, your main focus is likely ensuring the dividend is secure. In the past quarter, P&G’s free cash flow was $3.9 billion, more than enough to cover the $2.4 billion it paid out in dividends.
P&G has also committed to returning shareholder value through stock buybacks. That’s a way to ensure investors get more value from their shares, even when the company hits a lagging period.
PG Stock Buybacks (Quarterly) data by YCharts.
If you’re investing with the next 30 years in mind, you’ll want to invest in companies that have stood the test of time and shown themselves to be virtually indispensable. That’s Coca-Cola and P&G.
Coca-Cola has a stronghold on the non-alcoholic beverage industry, but it also refuses to use previous success to justify getting complacent. Whether it’s ready-to-drink alcohol or plant-based drinks, Coca-Cola has shown it’s willing to invest in research and development in order to stay ahead of the curve and adjust to changing consumer preferences.
P&G’s longevity is all but guaranteed because of the products in its portfolio. People will forego many other products and services before they forego the household, hygiene, and cleaning products that P&G sells.
When you look back 30 years from now, chances are you’ll be glad you had these two companies in your portfolio. Ideally, you’ll take advantage of a dividend reinvestment plan (DRIP) to maximize your number of shares, and then begin taking cash payouts in retirement.
A solid base of dividend stocks can provide a reliable source of supplemental income in retirement.
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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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