5 Stocks for Busy Investors
02/22/2013 10:30 am EST
More than six months ago, The Motley Fool UK recommended five investment ideas for busy investors, from both sides of the Atlantic. Here, Jill Ralph reviews how the shares have fared since.
Investing doesn't have to be a full-time job—or even the thing you're most passionate about. (Though if it is, we may have a spot for you at The Motley Fool!)
The truth is, you're busy. You love your money. You've worked hard for it and don't want to watch it idle away in a bank. But you probably don't want to obsess about it day in and day out, either.
If this sounds like you, you may be a set-and-forget investor. This means you want to find and own shares in the types of companies that provide a good mix of portfolio stability, peace of mind, and extra income. Let's take a closer look.
Size and Stability
GlaxoSmithKline (GSK) is a massive, £72 billion company with a long tenure in the pharma industry and a strong history of returning cash to shareholders.
Though not impossible, wild share price swings in a company like Glaxo are unlikely. In fact, since July, Glaxo has essentially been flat. The FTSE All-Share, by comparison, is up 14% over the same period.
Did I get it wrong? Not necessarily. Glaxo likely hasn't caused shareholders many sleepless nights because the share price has been so steady.
It also consistently throws off a lot of cash in the form of dividends. In 2012 alone, GlaxoSmithKline returned £8.8 billion to shareholders through share buybacks and dividends. It currently pays about a 5.1% yield, edging out the pharmaceutical average of 4.8%—and leaving your savings account rate in the dust.
So, what shareholders may have missed in share price appreciation, they've made up for—in part—with quarterly dividends of about 17p per share.
Consistent and Growing Cash Flow and Revenue
Set-and-forget investors can be well served looking for recession-resistant companies for their portfolio. I plucked Unilever (UL), a consumer staples giant with an incredibly steady business, for this very reason. People need the products Unilever sells (think soap, dishwashing liquid, margarine, and the list goes on).
Unilever has an established position here in the UK, as well as a growing presence in emerging markets. With a diverse range of products being sold worldwide, Unilever has a solid, tenured business that puts up consistent cash flows and pays a reliable and well-covered dividend yield (currently about 3.4%).
If you'd set-and-forget this one in July, you'd have seen a nice 18% increase in your shares, plus you'd have received a nearly 4% dividend paid last October.
Competitive Advantage, aka 'Moat'
When I think about a company with a strong competitive advantage, drink maker Diageo (DEO) comes to mind.
This company owns a huge range of spirits brands and has a massive distribution network worldwide. It is hard for new entrants to the market to gain ground on—and chip market share away from—Diageo.
Shares in Diageo have lagged the market a bit since my last review in July, posting gains of about 11% against the FTSE All-Share's 14% advance. Shareholders were, however, sheltered from any wild swings in the share price—and rewarded with a final dividend payment of 27p per share in October.
Another huge drink maker with a massive moat in the non-alcoholic markets is Coca-Cola (KO). The shares actually split 2:1 in August, meaning for every share you owned before the split you were given two. Adjusting for the split, the shares are down about 5% from July, though a few dividends have been paid out.
Dividends (The Common Thread)
A theme in the shares I've mapped out for a set-and-forget portfolio is that each pays a dividend.
Remember, a dividend paid to you is a real return—you get paid for owning the shares. Dividends can help smooth out any emotional sweating you may do over share price movement.
After a brutal start to 2012 that saw shares sell off heavily, Tesco (TESO) management had work to do. They were clear that they would focus on strengthening its UK business while growing as a multi-channel retailer in more international markets. It's been a year, and I for one have been pleased with Tesco's progress on those fronts.
Shares have outpaced the market, and are up about 18% since I wrote about them in July. And when it comes to dividends, Tesco's track record is hard to beat. It's raised its annual dividend payout for nearly 30 years in a row, offering income-focused investors a nice yield to rely on.
Pair that with Tesco's foundation in the UK and growing business internationally, and this set-and-forget share seems deserving of a spot in the busy investor's portfolio.Read more from The Motley Fool UK here...