There are some companies so fundamental to the way the global economy functions, and so well run, they’re likely to flourish and reward investors from here to the next geological era. Warren Buffet calls dividend paying stocks “forever stocks,” but to clarify: I think you can buy shares of these companies and not lose a night’s sleep for the next 30 to 60 years.
For example, take Boeing (NYSE: BA). The world is always going to need commercial airliners, and America is always going to need military hardware. Boeing is a leader in both: it’s one of only two global makers of big commercial jet planes, and one of the biggest and best Pentagon contractors.
After a great run from $26 in 2009 to $144 in January 2014, Boeing’s stock took a $25 hit. The reason? Concern that military spending is shifting into permanent low gear. But let me tell why I’m not worried.
First, in 2013 Boeing generated 61% of its record $86.6 billion in revenue and 63% of its earnings from operations from its commercial airplane business. Second, the company has an order backlog of $441 billion, of which only $67 billion is from its military and government businesses. Third, it’s cutting costs and raising margins. Fourth, the company continues to focus on increasing shareholder value: it bought back $1 billion of its common stock in 2013, and increased its dividend by 50 percent – for an unbroken record 43 years of rising dividends.
Boeing now pays an annualized dividend of $2.92 a share, for a yield of 2.27% . Whatever happens to military spending, you can look for those numbers to increase over the long term.
Next up, Intel (NASDAQ:INTC). The world runs on computers and Intel is the long-term dominant company in personal computer processors, with some 84% of the world’s PC chip market. Neither of those is going to change. PC sales have been declining worldwide, while smartphone and tablet sales soar, but Intel’s not asleep: it’s making a push into those markets too, with splashy introductions of new chips that are faster and extend battery life more than the competition’s.
And, as processing moves into the cloud, power for all the data centers has to come from somewhere. It’ll be Intel, which has the cash and smarts to remain on the cutting edge of technology. The company has $22 billion in cash and routinely generates $8-$10 billion in free cash flow annually. That’s a ton of cash to fuel everything it’ll ever want to do, including paying its handsome 3.6% yield.
Third: the world will always demand entertainment. My pick here is Disney (NYSE: DIS), the only firm that’s managed to make entertainment a cash cow. It’s been a global brand name for more than 50 years, has tremendous product diversification (movies, a TV network, theme parks, and more), and makes robust acquisitions that help it stay ahead of the competition. I wish its 1.1% yield was larger, but when you consider its average annual return of 25.3% over the last three years, it’s been a very good deal indeed.
About Lawrence Meyers
Larry is regarded as one of the nation’s experts on alternative consumer finance. He consults for hedge funds and private equity via his Council Member status at Gerson Lehman Group, and as a member of Coleman Research Group’s Executive Forum. He also consults for Credit Access Businesses and Credit Services Organizations in Texas. His Op-Eds and Letters to the Editor have appeared in over two dozen major newspapers. He also brokers financing, strategic investments, and distressed asset purchases between private equity firms and businesses of all stripes. You can reach him at email@example.com.
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 All data from Boeing annual report; see http://boeing.mediaroom.com/2014-01-29-Boeing-Reports-Record-2013-Revenue-EPS-and-Backlog-and-Provides-2014-Guidance