There aren't a lot of companies that I have so much faith in that I could literally buy them and never sell them. And by "never", I mean, never. I would pass them on to my kids with instructions to never sell and to pass them on to their kids. These companies operate businesses that are so fundamentally intrinsic to the human experience that if they died, so would we…or at least some of us. Plus, they pay -- and always will pay -- great dividends.
Phillip Morris International (PM) is the first no-brainer in this category. There are 1.1 billion smokers globally today, and that number is expected to rise to 1.6 billion by 2025. 55% of Asia smokes. No matter how many lawsuits have been filed against the tobacco industry, no matter how many people die from smoking, no matter how many ugly warning labels get slapped on packages, and no matter how often taxes get raised on cigarettes, people will always smoke. With a 5 year projected earnings growth of 13.26%, the company trading at a P/E of 14 on this year's earnings, trailing-twelve-month free cash flow of almost $10 billion, and a 4.7% dividend, Philip Morris is not only in solid financial shape, it is arguably undervalued. There's also nothing wrong with snatching up Altria Group (MO), with its 5.9% yield, and $2.8 billion in TTM FCF. However, I think it's less diversified and arguably overvalued, as it trades at a current P/E of 13.5 on 5 year growth of only 8%.
I frankly don't buy into the nonsense that we are going to run out of oil anytime soon. It's also been proven that solar and wind are not economical enough, nor do they provide enough power to be viable alternatives. Face it, the world will always run on oil. You have several choices in this arena. Conoco-Phillips (COP) had $17 billion in cash flow in 2010, against only $1.2 billion in interest and $27 billion in debt. ExxonMobil (XOM) generated a whopping $48 billion in cash flow against a tiny $260 million in interest, and $12 billion in debt. Even BP (BP), despite the Gulf spill, generated $13.6 billion in cash flow against $45 billion in debt, and they usually run $27 - $40 billion in annual cash flow. Chevron (CVX) produced $31 billion in cash flow against only $11 billion in debt. And none of this mentions the billions of cash these companies have on their balance sheets.
Each stocks also offers steady, growing dividends. BP reinstated its dividend to a 4.4% yield, Chevron pays 3.2%, Conoco yields 3.9%, Exxon pays 2.5%. I personally think ExxonMobil is the best positioned, and would buy that.
The final selection should put some fizz in your step. Coca-Cola (KO), I believe, will be one of the few things left standing following the Zombie Apocalypse or the next Civil War. Even zombies will be drinking Coke -- or Fanta, Dasani, Bacardi Mixers, Mello Yello, Enviga, Five Alive, Full Throttle, Fuze, Hi-C, Lift, Minute Maid, Nestea, Odwalla, Seagram’s, Simply Orange…the list goes on and on. It's a staggering thought that almost $47 billion in Coke products will be consumed this year, and that after all this time, Coke is still projected to grow earnings at a 9% clip over each of the next five years. The company routinely returns more than half its FCF to shareholders in the form of its 2.5% yield. It has over $10 billion in cash on its balance sheet, as well.