A ‘Hated’ Stock Worth Owning Forever
Yesterday, I told you about a select group of stocks we’ve come to refer to around the StreetAuthority office as “Forever Stocks.”
For those of you aren’t familiar, these are the companies that have rewarded shareholders for generations. They outlast (and in some cases outperform) during even the worst economic and market conditions.
That’s because not only do these companies often sport durable brand names and impenetrable economic moats, but they have strong competitive advantages that help them consistently outperform the market for decades.
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In my previous essay, I went into further detail about Forever Stocks and even gave away the name and ticker symbol of one company you could consider holding “forever.” (To read that issue, go here.)
I also mentioned that my colleague Jimmy Butts recently identified seven of his absolute favorite Forever Stocks his latest report. And while I won’t give those names away out of fairness to his premium Top Stock Advisor readers, I’d like to share another example of a Forever Stock with you today.
This Stock Is Hated By Many… But It’s Worth Owning ‘Forever’
I can’t think of a stock that’s more despised by your average person on the street than Philip Morris International (NYSE: PM). Yet year after year, the international arm of Phillip Morris (the original company has been around since 1847) is still making investors rich.
Look, I realize that this investment isn’t for everyone. We’ve written about this company several times before. And just about every time we mention it, we end up receiving nasty emails admonishing the fact that we would cover — let alone recommend — investors own shares of this company.
But stick with me here. Remember, my purpose here is to show you what truly defines a Forever Stock — and PM certainly qualifies on this scale. The company does business in more than 180 countries and owns seven of the world’s top 15 global brands in the cigarette market.
Just take a look at its performance in the past 10 years…
While markets have charged ahead year after year in the aftermath of the financial crisis, you’d think that a “tired old” defensive name like this would lag during one of the longest bull markets in history. That’s simply not the case.
Many investors seem to be tricked into thinking that you have to be some kind of guru to beat the market. But the truth is it’s not that complicated. And Forever Stocks like Philip Morris prove it.
Philip Morris has a simple business model. Cigarettes, like it or not, are a product that simply don’t change much over the years. That means the company doesn’t have to spend billions on things like research and development — leaving plenty of cash on hand to return to shareholders. And PM is definitely one of the most dominant and shareholder-friendly companies on the planet.
In the last 10 years, it has returned billions in dividends while increasing the payments per share by 121%. Today, the shares pay a yield of about 4%, more than double the average S&P 500 stock.
Then there are the buybacks. The company recently completed a three-year, $18 billion share repurchase program, bringing the total amount of repurchased shares to about $27 billion since 2008.
All of these moves simply make the stock more valuable, even if earnings don’t rise a cent. And as you can see, that’s showing up in the share price as well.
Of course, with investing there’s never a surefire thing. There’s no quality a company can possess that will guarantee its success.
But when you can find companies like Philip Morris that dominate their market and are returning billions to investors, these are the sort of stocks that can still deliver strong returns in nearly any market — including this one.
Editor’s Note: As I mentioned earlier, my colleague Jimmy Butts has a new report detailing his absolute favorite Forever Stocks — and it’s available at absolutely no cost to members of his premium investing service, Top Stock Advisor. To learn more about how to get your hands on the names and ticker symbols of these stocks, click here.