Investing in a business to hold it forever is a simple idea, but it is not easy. Most companies cannot maintain their competitive advantages forever. Ultimately, most companies succumb to existential threats, such as competition or innovative disruption. Sometimes entire industries die out, as do the companies within them.
So, what do buy-and-hold do forever shares look like?
For starters, they have to operate in an industry that is unlikely to disappear. Healthcare is a good example.
You then want to invest in companies that have proven that they can remain relevant. Paying dividends is pretty solid evidence of continued relevance. Or, more specifically, paydividends that increase year after year. Since dividends are cash payments from a company’s profits to investors, the company must continue to grow to pay for them.
Now it’s time to put this framework into practice. Here are three healthcare stocks poised to put passive income in your pocket for decades. Consider buying them now.
AbVie(NYSE: ABBV) is a pharmaceutical company and Dividend King with more than five decades of continuous dividend growth, dating back to its years as part of Abbott Laboratories. Pharmaceutical companies can be risky because of the grow-or-bust nature of heavily regulated drug development. AbbVie recently had a high-profile failure with a schizophrenia drug it acquired when it bought Cerevel Therapeutics for $8.7 billion. The best-selling drug, Humira, was no longer patented last year. Setbacks like these are normal in the industry.
Yet AbbVie has overcome these obstacles with a diverse product portfolio and pipeline. Despite these setbacks, analysts still estimate that AbbVie will grow earnings by an average of 8% per year over the long term. That’s enough growth to keep raising the dividend. The company has increased its dividend by an impressive average of 14% per year over the past decade, and the dividend payout ratio is still very manageable at 57% of AbbVie’s 2024 earnings estimates.
Investors may not find a more proven pharmaceutical stock than AbbVie, and the company continues to see success. That’s a stock that investors can count on for the long term, making AbbVie the rare pharmaceutical stock one should consider buying and holding forever.
Stryker(NYSE:SYK) is a medical technology company. Stryker is a global company that sells a variety of equipment and products, from hospital beds to joint replacement implants. Innovation is its business model and its products help raise healthcare quality standards worldwide. Stryker has nearly 13,000 worldwide patents that help protect the company from competitors who copy its products.
Such a diverse product portfolio translates into a stable business model. How reliable is Stryker? If we go back to 1984, the company’s annual sales haven’t dropped by more than 6%! Of course, that also makes Stryker an excellent dividend stock. The company has paid and increased its dividend for 31 years in a row, and that isn’t likely to stop anytime soon.
Stryker’s dividend payout ratio is just 26% of 2024 earnings expectations. Meanwhile, management has raised the dividend at a significant rate, an average of 10% per year over the past decade. This innovative company covers so many areas of healthcare that it’s a no-brainer for investors looking for passive income they can count on indefinitely.
Cardinal health(NYSE: CAH) plays a crucial role in healthcare, yet you’ve probably never heard of the company. Cardinal Health manufactures and distributes medical, pharmaceutical and laboratory products and provides technology services to healthcare providers and hospitals. You could think of Cardinal Health as playing a key role in the supply chain of a very complex industry. The company keeps thousands of hospitals and healthcare facilities supplied and running smoothly so they can focus on caring for patients.
As you can imagine, patients never need more care, so Cardinal Health’s business is almost always booming. That’s helped the company pay and increase its dividend for 29 years in a row (and counting). Cardinal Health’s dividend is currently just over 25% of estimated 2024 earnings, so there is no financial pressure to continue paying and increasing this in the future.
Cardinal Health operates in more than 30 countries. Its global footprint makes it an excellent long-term investment given the world’s growing population and the likelihood that the quality of healthcare in emerging markets will improve as those countries’ economies mature. That should mean decades of steadily rising dividends ahead.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:If you had invested $1,000 when we doubled in 2009,you would have $348,112!*
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We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns December 9, 2024
Justin Pope has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends AbbVie and Abbott Laboratories. The Motley Fool has a disclosure policy.
Do you want passive income for decades? 3 Stocks to Buy Now and Hold Forever was originally published by The Motley Fool
