Top Picks for the Next 25 Years

09/01/2017 2:50 am EST

Focus: DIVIDEND

Charles Carlson

Editor, DRIP Investor

I started DRIP Investor 25 years ago with the mission of showing individual investors how to get their piece of Wall Street via relatively unknown dividend reinvestment plans, explains Chuck Carlson, editor of DRIP Investor.


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To be sure, things have changed over those 25 years. Many more stocks now allow investors to buy the first share and every share directly.

DRIPs are an important investment vehicle that allow anyone the ability to participate in the stock market in dollar terms that make sense for his or her pocketbook.

My initial “Editor’s Portfolio” from 1992 began with Bristol-Myers Squibb (BMY), Exxon (XOM), PepsiCo (PEP), Procter & Gamble (PG), Walgreens (WBA) — and Browning-Ferris, which was acquired in 1999.

A few things jump out from this list. For starters all but Browning- Ferris are still in the current Editor’s Portfolio. The fact that I have held these stocks for 25 years is evidence of my “buy-and-hold” mantra when it comes to high-quality stocks.

Second, while each of these stocks has had its highs and lows over the last 25 years, each has put up very nice returns since 1992, showing annual returns since 1992 ranging from 8.9% to 13.5%.

Do these stocks represent good holdings for the next 25 years? In each case, I think the answer is yes. I believe each should continue to be decent wealth-builders over the next quarter century.

As for additional stocks, at the top of the list of excellent stocks for the next 25 years would be Equifax (EFX)  and Paychex (PAYX). Both stocks still have plenty of upside ahead of them.

Equifax’s data-driven business services should be in demand, especially overseas where the market opportunity is huge. The company’s market capitalization of $17 billion leaves plenty of room for expansion.

Paychex, a leader in payroll processing and other human-resources outsourcing functions, has a market capitalization of less than $20 billion and, too, has ample runway for growth. Returns over the next 25 years should be buoyed by decent dividend flow, with the current dividend yield more than 3.5%.

Also offering excellent 25-year potential is Zoetis (ZTS), the leading provider of animal health medicines and vaccines. Its products are sold in more than 100 countries.

Nearly 60% of its revenue comes from farm animals, with 40% coming from “companion” animal products. As populations continue to increase across the globe, the health and safety of livestock becomes even more essential. And the trend of people spending more on pets doesn’t seem to be going away.

Zoetis is perhaps the best direct play on this expansive market and should put up healthy returns over the next quarter century. The stock is a buy for long-term, buy-and-hold investors.

Another stock well situated for the next 25 years is J.P. Morgan (JPM) . I don’t think the banking business is going away anytime soon, and I expect J.P. Morgan to remain the blue-chip play in the field.

In the near term, the company should benefit from some upward creep in interest rates. And I expect banking regulations to loosen a bit, which would be good news for J.P. Morgan.

Finally, the billions in fines and penalties that major banks like J.P. Morgan were subjected to over the last eight years are winding down. It all adds up to tremendous earnings power for the firm.

The company is taking advantage of that earnings power by boosting its dividend 12% to a quarterly rate of $0.56 per share, payable at the end of October.

The stock’s dividend yield based on the higher rate is 2.5%. The company has also authorized stock buybacks of up to $19.4 billion through June 30, 2018. Financial stocks should be held in every portfolio, and J.P. Morgan represents perhaps the top banking stock in the DRIP universe.

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