The Dow 30 is an index of 30 prominent companies that make up the Dow Jones Industrial Average (the Dow). The Dow is price-weighted, so it generally includes companies with large market capitalizations. That said, long-term investors tend to own one or more Dow stocks for long-term growth.
Through a combination of stock price appreciation and dividend growth, many of these stocks carry the label of “forever stocks.” That term was made famous by Warren Buffett who has said that forever is his preferred length of time to own a stock.
Look, there will be books and documentaries made about NVIDIA (NASDAQ:NVDA). It’s been a wonderfully profitable stock for buy-and-hold investors. And it still has years of growth ahead. But is it a stock that will still be delivering market-beating returns for your grandchildren? It’s too early to tell. However, the three stocks listed here have a long track record that should let you pass on a legacy of growth for future generations.
Visa (V)
One quality that investors look for in potential forever stocks is their ability to grow earnings. In the case of Visa (NYSE:V), the growth stems from its business model. As the world’s largest payment processor, it simply makes money on the transactions we make every day. And as Nabeel Bukhari recently noted, the company is carving out space in the cryptocurrency ecosystem.
This has allowed the company to deliver earnings growth of 17%, 27% and 17% in the past three years. And it’s on track for 13%, 12%, and 14% growth in the next three years.
Not only has this allowed V stock to climb over 57% in the last three years, but it’s allowed for a three-year annualized dividend growth of more than 15%. This is what compounding is all about and it’s why Visa is one of the Dow stocks for long-term growth.
Visa is currently trading for about 27x forward earnings. That’s a little pricey, but considering the growth it delivers, it’s a premium you’ll be happy to pay.
Microsoft (MSFT)
Through its substantial investment in OpenAI, Microsoft (NASDAQ:MSFT) sprung to a lead in embedding generative AI throughout its multi-layered ecosystem. Not surprisingly, MSFT stock is up 33.5% in the last 12 months and is part of the group of Magnificent 7 stocks that have been lifting the market.
But the beauty of owning MSFT stock as one of the Dow stocks for long-term growth is the idea that AI is acting as the cherry on top of the company’s growth story. But it’s far from the whole sundae.
Through its Windows operating system, Microsoft has the dominant market in desktop systems that also provides an avenue for its Microsoft 365 productivity tools. Plus, its Azure platform allows Microsoft to be a significant player in the cloud computing sector. And it’s also one of the most significant names in the gaming market.
In addition to the 236% stock price growth in the last five years, Microsoft adds to investors’ total return with a dividend that has been growing for 22 consecutive years.
UnitedHealth Group (UNH)
The story of UnitedHealth Group (NYSE:UNH) as one of the Dow stocks for long-term growth starts in 2009. Not surprisingly, that’s when the United States started its transition to universal health care. Since that point, UNH stock has achieved a compound annual growth rate (CAGR) of 24.18%. And in the next 12 months, analysts expect the company to generate 12% earnings growth.
In 2024, the aging of America is a major catalyst for UnitedHealth Group. An increasing number of Medicare patients are now in Medicare Advantage plans. And at the end of 2023, UnitedHealth had nearly 30% market share of this market. There is a debate to be had about the effectiveness of Medicare Advantage plans. This isn’t the place for that.
This is about stocks that offer investors a chance for multi-generational growth. Keep it simple. Healthcare is one of those sectors that will always be relevant, and UnitedHealth will continue to be one of the leading names in that sector.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
