Time and Stocks: DRIP Favorites

05/13/2015 9:00 am EST

Focus: STOCKS

Charles Carlson

Editor, DRIP Investor

The Wall Street Journal recently wrote an article about Ronald Read, who died last year at the age of 92, and had worked as a janitor at a J.C. Penney store after many years at a gas station in Vermont, reports Chuck Carlson, editor of DRIP Investor.

By all accounts, Mr. Read led an unremarkable life. But what he left his heirs-a local hospital and a library-was anything but unremarkable. He left an estate valued at roughly $8 million.

I love stories like this. How could a person, whose weekly paycheck was probably on the meager side, amass such a fortune?

Time and stocks. Read owned at least 95 stocks at the time of his death, many of which he apparently held for many years.

I've said it many times—but it bears repeating—stock investing represents the single most powerful way for anyone to build wealth over time. And the great thing is that you don't necessarily need a lot of money to get started.

Looking long-term requires patience, something in short supply these days for many people. And investing in stocks means taking risk and risk frightens people.

What Ron Read knew, however, is that the risk of losing money in stocks decreases the longer you invest. Consider these statistics:

  • According to Morningstar's Ibbotson Associates, a portfolio invested 100% in large stocks posted positive returns in 65 of the 89 years since 1926, for an annual winning percentage of 73%.

  • Lengthen the time horizon to five years and there have only been 12 rolling periods out of the 85 since 1926 in which stocks lost money, a winning percentage of nearly 86%.

  • In 10-year rolling periods since 1926, large stocks lost money only four times in 80 periods, a winning percentage of 95%.

  • Finally, there has never been a 20-year rolling period when large stocks didn't produce a positive return. The story is pretty much the same for small stocks.

What stocks represent good picks for the long-term? Below are some of my favorite DRIPs (dividend reinvestment plans) for long-term investment.

Chubb (CB)—yield 2.3%
CVS Health (CVS)—yield 1.4%
Disney (DIS)—yield 1.1%
Equifax (EFX)—yield 1.3%
Exxon Mobil (XOM)—yield 3.2%
FedEx (FDX)—yield 0.5%
Macy's (M)—yield 1.9%
Novo Nordisk (NVO)—yield 1%
Union Pacific (UNP)—yield 2%
Walgreens Boots (WBA)—yield 1.6%

All of the stocks offer direct-purchase plans whereby any investor may buy the first share and every share directly from the company.

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