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, VIN COLBY (15 clicks)
Long only, dividend growth investing, large-cap, mega-cap
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Short of buying real estate to rent in prime locations, safe, established dividend stocks are the best way for long-term investing. In my last article, I have received several comments skeptical of holding stocks "forever." One reader even stated "I date my stocks. I never marry them."

While I believe that marriage is a far more desirable arrangement for solving the need for fighting loneliness in this life, I also firmly believe in the "forever" holding period for stocks, recommended many times by the best investor that ever lived - Warren Buffett.

One of the chief attractions of investing in stocks to me is the freedom from bother afforded when you carefully select stocks. Choose stocks that you would be comfortable leaving to your heirs and you will surely reap big dividends in the long term. This "forever" holding period, to my mind, is the same that is applied to prime location real estate - you will certainly fare better if you hold such property indefinitely, and the longer you hold it, the better your return shall be.

Choosing "forever" stocks is not easy and here I recommend another approach expounded by Mr. Buffett - invest like you have a ticket with only 20 slots in it. Imagine having the right to invest in only 20 stocks in your lifetime. I'm sure you would be much more careful in choosing in that case, and that alone should deliver superior results - it's like holding prime real estate over 20-30 or more years, economic benefits must accrue to you.

Here are 3 further stocks that may deserve a space on your 20-slot ticket:

1.) Wal-Mart Stores (NYSE:WMT)

  • Current dividend yield: 2.20%
  • Annualized growth in total cash dividend paid since 2008: 8.90%
  • Annualized growth in EPS (earnings per share) - last 10 years: 11.11% (that's 2.6 times since 2003)
  • Number of shares in 2012 / number of shares in 2008 = 82.73%

Wal-Mart Cash Flow

Fiscal Year Ending Jan 31

2012

2011

2010

2009

2008

Total cash from operations (millions USD)

24,255

23,643

26,249

23,147

20,642

Total cash from investing (millions USD)

(16,609)

(12,193)

(11,620)

(10,742)

(15,670)

Free Cash Flow - FCF (millions USD)

7,646

11,450

14,629

12,405

4,972

Total cash dividends paid (millions USD)

(5,048)

(4,437)

(4,217)

(3,746)

(3,586)

FCF / cash dividends paid

1.51

2.58

3.47

3.31

1.39

Issuance (retirement) of stock, net (millions USD)

(6,298)

(14,776)

(7,276)

(3,521)

(7,691)

Basic/primary weighted average shares (millions)

3,460

3,656

3,866

3,939

4,066

Source: ft.com

Caveat: I recommend not buying WMT now if you are an older person needing immediate high yield. This stock is currently overbought after a 20% + rise during the last year. Stock was stagnant since 2008, only to explode last year on an expected strong annual dividend rising policy of at least 10% per year. As you can see from the table above, that kind of increase can be easily sustained.

2.) Lockheed Martin Corp (NYSE:LMT)

  • Current dividend yield: 4.98%
  • Annualized growth in total cash dividend paid since 2007: 8.52%
  • Annualized growth in EPS (earnings per share) - last 10 years: 23.43% (that's 6.6 times since 2002)
  • Number of shares in 2012 / number of shares in 2007 = 77.88%

Lockheed Martin Cash Flow

Fiscal Year Ending Dec 31

2011

2010

2009

2008

2007

Total cash from operations (millions USD)

4,253

3,801

3,487

4,421

4,238

Capital expenditures (millions USD)

(987)

(1,074)

(1,166)

(926)

(940)

Free Cash Flow - FCF (millions USD)

3,266

2,727

2,321

3,495

3,298

Total cash dividends paid (millions USD)

(1,095)

(969)

(908)

(737)

(615)

FCF / cash dividends paid

2.98

2.81

2.56

4.74

5.36

Issuance (retirement) of stock, net (millions USD)

(2,465)

(2,420)

(1,851)

(2,681)

(1,777)

Basic/primary weighted average shares (millions)

336

364

385

400

416

Source: ft.com

3.) Wesfarmers Ltd (WFAFF.PK)

  • Current dividend yield: 4.55%
  • Annualized growth in total cash dividend paid since 2008: 24.11%
  • Annualized growth in EPS (earnings per share) - last 10 years: 3.76% (that's 1.39 times since 2003)
  • Number of shares in 2012 / number of shares in 2008 = 198.6%

Wesfarmers Cash Flow

Fiscal Year Ending Jun 30

2012

2011

2010

2009

2008

Total cash from operations (millions AUD)

3,641

2,917

3,327

3,044

1,451

Total cash from investing (millions AUD)

(2,169)

(1,876)

(1,696)

(1,627)

(5,501)

Free Cash Flow - FCF (millions AUD)

1,472

1,041

1,631

1,417

(4,050)

Total cash dividends paid (millions AUD)

(1,789)

(1,557)

(1,325)

(1,066)

(754)

FCF / cash dividends paid

0.82

0.67

1.23

1.33

-

Issuance (retirement) of stock, net (millions AUD)

5.00

5.00

7.00

4,652

2,952

Basic/primary weighted average shares (millions)

1,154

1,153

1,153

932

581

Source: ft.com

Explanation for strange looking cash flow numbers: Wesfarmers is an Australian conglomerate. Called the Australian Berkshire-Hathaway by some, its operations include many activities from coal mining to retailing, making it a good cross section of the Australian economy. In 2007, at the height of the last economic expansion, Wesfarmers bought one of the two largest grocery chains in Australia - Coles - for 22 billion AUD ($23.21 billion). Larger than usual cash from investing in 2008 and the subsequent issuing of shares are the consequence of that.

Source: 3 More Dividend Stocks To Buy Now And Hold Forever