'Forever' stocks are core components of anyone's portfolio. These tend to be long established companies with high market capitalizations, dividends, and market leadership positions. Many of these are particularly effective to use with dividend reinvestment programs (“DRIPS”) that most 'forever' stocks offer. I will look at a few companies that are examples of 'forever' stocks, but by no means an exclusive list.
Glaxo, Smithkline, PLC. (GSK)
GSK is listed on the NYSE and was trading recently at about $43.50 per share, near the highpoint of its 52 week range of from $45.68 to $36.28. Its market capitalization is nearly $108 billion, and its trailing P/E is 20.8. It currently pays a dividend of $2.17, for an annual yield of 4.90%.
London based GSK is one of the world's leading pharmaceutical companies. In its fiscal third quarter, profits-- excluding one time charges-- were fundamentally unchanged from the year earlier. While important drugs lose patent protection in the next 18 months, the R&D pipeline, along with $9 billion in cash on hand, are adequate to restore growth. In the meantime, GSK's dividend itself is enough to support the stock price, even without impressive growth.
GSK has a low beta of 0.67, and rarely surprises anyone in its quarterly earnings. All of the above make for a nice 'forever' holding. An even better choice in the forever category of health stocks is Johnson and Johnson (JNJ).
Dollar General Corp. (DG)
DG is listed on the NYSE, and has been trading recently at about $39 per share, near the high end of its 52 week range of $40.71 to $26.65. It has a market capitalization of $13.2 billion, and a trailing P/E ratio of 20. It does not pay a dividend.
DG was taken private in 2007, and then went partially public again in 2009. Kohlberg,Kravis Roberts & Co. (KKR) still owns over 70% of the company. Legendary Warren Buffett's company, Berkshire Hathaway, Inc. (BRK.A) took an additional 1.5 million share stake in DG in October.
In its most recent quarter, DG's net income increased 3% from the year earlier quarter, to $146 million. However, the overall picture is better than that. Internal and external guidance suggests a 10% - 12% improvement in net profits for 2011 when compared to 2010. As the nation's leader in discount retail stores, the weak economy actually benefits DG.
However, when looking for 'forever' stocks, I want more than what DG offers. In the retail field, Costco Wholesale Corp. (COST) has a far stronger balance sheet, growth history, and dividend. I would choose COST over DG as a forever stock.
Mastercard, Inc. (MA)
MA's shares are listed on the NYSE, and were trading recently for about $357 per share. That is near the top of its 52 week range of $368.99 to $215.00. Its market capitalization is about $45.5 billion, and its trailing P/E is 21. It pays a dividend of $0.60, for an effective annual yield of 0.20%.
With leading positions in both credit and debit cards worldwide, MA had a stellar third quarter. Its profits of $716 million represented a 38% increase from the year ago quarter. Its per share earnings increased by 43%, due to MA's share buyback program.
With worldwide presence, growth, $4 billion in cash, and zero debt, MA's prospects could hardly be better. With stronger margins and better worldwide reach than competitor Visa, Inc. (V), I happily include MA as a 'forever' stock.
American Express Co. (AXP)
AXP is listed on the NYSE, and was trading recently for about $49 per share. Its 52 week range is from $53.80 to $41.25. It has a market capitalization of just over $57 billion, and a trailing P/E of 12.3. It currently pays a dividend of $0.72, for an annual yield of 1.40%.
AXP's third quarter of 2011 continued a string of strong quarters since the end of the most recent recession. In the third quarter, AXP reported income of $1.235 billion, or $1.03 per share. The per share earnings represents a 14% improvement from the year earlier quarter. Increasing revenues worldwide, and lower chargeoffs due to improved credit quality, drove the earnings. AXP also boasts a 28% return on equity.
AXP is not really a bank, nor is it a travel company per se. It is a conglomerate of these industries and others. It has been through 160 years of recessions, wars, and regulations. It is cheap right now on a P/E basis, and now is good time to buy a piece of one of America's premier companies.
Coca Cola Company (KO)
KO stock is listed on the NYSE, and was trading recently at about $67 per share. Its 52 week range is 71.77 to 61.29, and its market capitalization is about $150 billion. It has a trailing P/E ratio of 12.3. It pays a current dividend of $1.88, for an annual yield of 2.70%
KO had an excellent third quarter to 2011. Profits rose by 8% from the year earlier to $2.22 billion, or $0.95 per share. Its internal numbers, such as its 41% return on shareholders' equity, are stellar. It has increased dividend payments each of the past 46 years. It sells at a discount to competitor Pepsico, Inc (PEP) despite having had stronger growth rates and a cleaner balance sheet.
People will always be drinking Coke. It is a worldwide, cultural icon. It belongs on any investor's forever list.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.