My 2012 resolution includes finally getting my entire regular and retirement portfolios all set up for the long term. With my personal life in transition over the past few years, it’s been difficult to do more than write about stocks and positions I’m excited about and make a few trades here and there. I plan to set up a core set of holdings that are intended for the very long term — as in, I plan to buy them and hand them down to my kids someday. In that category of “forever holds” are stocks that also pay nice, regular dividends.
I know I’m on to something in this category if I mention a stock to my super-conservative father and he approves of my choice. He’s held Abbott Laboratories (NYSE:ABT) for as long as I can remember. The company has paid a dividend since it went public some 30 years ago and has increased it 7% to 10% every year without fail. The stock’s forward P/E is about 11.2, and it has a projected long-term growth rate of 9%. Frankly, the premium is deserved considering the $8 billion in free cash flow the company generates, its solid slate of drugs on the market, and the 3.3% yield factored in. It’s a classic stock that deserves a place in the core portfolio.
I remember that my first digital watch was made by Texas Instruments (NYSE:TXN). Its red digital numbers would glow off its black face. I even remember buying the stock as part of our sixth-grade stock-buying competition in math class. Would that I’d actually purchased the stock then — I’d be sitting on a 24-bagger. I’m still happy to scoop it up today. Although its long-term growth prospects only fit that of a stalwart at 7.5%, it again has a rich dividend history and one that includes an increase year after year. Plenty of free cash flow abounds with this venerable business, and I’ll be happy to own it in my retirement portfolio at some point.
Readers of my column know I harp on energy all the time as a forever hold, and that isn’t going to change…ever. There are so many great plays in energy — from oil producers to pipeline LPs to infrastructure plays to explorers — that it’s hard to choose just one company. Frankly, this area is a toss-up. However, since we’re talking about dividends, I’m going to go with the 3.6% yield of Conoco-Philips (NYSE:COP). There’s nothing wrong with its competitors, but Conoco has the highest and safest yield of the big producers. I haven’t decided if this will end up in my retirement or regular account just yet, but there’s no wrong choice, fortunately.
Of course, you should review your own portfolio and risk profile to determine if these stocks fit your own criteria. I prefer going a bit more conservative on the forever holds, while balancing things out by playing around in riskier small-caps.
Lawrence Meyers does not presently own any of the stocks mentioned but may purchase all three sometime in 2012.