The stock market is so dynamic that it’s difficult to predict what a stock will do over a two-year stretch, much less a 25-year stretch. Yet every young long-term investor is looking for the best stocks to own for the next quarter century.
While none of us can look 25 years into the future, it can be helpful to look 25 years to the past at some of the best stocks of the last quarter century.
Since August 1, 1991, the S&P 500’s total return has been 463%. Each of the following top stocks generated total returns exponentially higher in that time.
Public Storage (PSA) +7,890%
One of the common denominators among all these top stocks is dividends. You’ll notice that these returns are total returns, which combines increases in share price with dividend payments.
Public Storage (PSA) stock pays a generous 3.2% dividend, and the company has grown to become the largest self-storage company in the world. Since the company is structured as a REIT, 90% of its earnings have been returned to shareholders as dividend payments. Therefore, a large part of the company’s 25-year gain has come from dividends.
TJX Companies Inc (TJX) +8,918%
There’s no question that the emergence of Amazon.com, Inc. (AMZN) has changed the future of retailers like TJX Companies Inc (TJX) forever.
However, TJX has been one of the best stocks over the past 25 years. Not even AMZN can slow the department store down. Through its Marshall’s, TJ Maxx, Sierra Trading Post and HomeGoods brands, TJX stock has grown revenue 33.4% and net income 52.3% in the past five years.
While other retailers are getting crushed by AMZN, TJX stock is up 190% in the past five years. The stock even pays a decent 1.3% dividend.
UnitedHealth Group Inc (UNH) +9,915%
The explosion of healthcare costs in recent decades has created a huge opportunity for health insurers like UnitedHealth Group Inc (UNH).
It has also been very profitable for health insurance investors.
Despite the huge run-up over the past 25 years, UNH stock is showing no signs of slowing down. Revenue is up 54.2% and net income is up 13% in the past five years. Incredibly, even though UNH has been one of the best stocks in the market for decades, it currently trades at a modest forward price-to-earnings ratio of only 15.7. UNH also pays a 1.8% dividend.
Lowe’s Companies, Inc. (LOW) +9,680%
As the total size of the U.S. population continues to grow, the number of Americans owning homes will grow as well.
Lowe’s Companies, Inc. (LOW) was founded way back in 1946. Seventy years later, it still delivers year-after year of earnings, revenue and dividend growth. That is the perfect recipe for becoming one of the best stocks of the past 25 years.
Today, LOW stock pays a 1.8% dividend. Despite a huge 284% gain in the past five years, LOW still trades at a modest forward P/E ratio of 16.5.
Paychex, Inc. (PAYX) +11,869%
PAYX is the world’s second-largest publicly traded payroll processing company, and the only one on this list that has been a total return 100-bagger in the past 25 years.
The stock is among the best stocks of the past quarter century for the usual reasons: consistent earnings/revenue growth and reliable dividend payments. PAYX stock’s dividend yield currently stands at 3.1%.
As government regulations get more and more complicated, PAYX’s services remain a necessity for businesses with large and complex payroll departments.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.
