3 Stocks I'm Not Selling, No Matter What the Market Does for the Next 20 Years
Key Points
Enbridge's goal is to provide the world with the energy it needs.
Procter & Gamble is a Dividend King and industry leading consumer staples maker.
International Business Machines is a tech giant that has proven it can adapt and change.
At first glance, Enbridge (NYSE: ENB), Procter & Gamble (NYSE: PG), and International Business Machines (NYSE: IBM) have very little in common. That's the point. Diversification is important when you build a dividend portfolio. But so is owning good companies. Here's why I have no plans to sell these stocks for the next 20, or more, years.
Enbridge's business is changing
Enbridge is one of North America's largest midstream companies. It owns the energy infrastructure that helps to move oil and natural gas around the world. While it is an energy company, it allows me to avoid commodity risk because it charges fees for the use of its assets. The dividend yield is 5.4%, and the dividend has been increased annually for 31 consecutive years, in Canadian dollars.
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That's the big picture, but there's one more crucial fact. Enbridge's goal isn't to be the best midstream company. It is to provide the world with the energy it needs. This is why the company's midstream business is complemented by natural gas utility assets and a small portfolio of clean energy assets. Essentially, it is shifting its portfolio to keep pace with the changes taking shape in the world. That makes me comfortable that I can own it for decades to come.
Procter & Gamble's innovation keeps it sharp
Procter & Gamble is a Dividend King, with over five decades of annual dividend increases behind it. That's proof that the company has staying power in the highly competitive consumer staples sector. I'm fond of consumer staples stocks because they make products people buy, regardless of what is happening in the stock market or the economy. Neither you nor I are going to stop buying toilet paper or toothpaste because there's a recession.
P&G is particularly interesting in the consumer staples sector because it is positioned at the high end of the markets it serves. Not only does it have strong distribution and marketing skills, but it also leans heavily on innovation to lead the industry, driving growth with new and improved products. Essentially, P&G isn't a follower; it is a leader, which makes it extra important to its retailer customers. Retailers know that working with P&G means they have brands on their shelves that will draw customers into their stores. The dividend yield is nearly 3% right now, which is actually fairly attractive for P&G historically.
International Business Machines changes, again
IBM is an over 100-year-old technology company. It has increased its dividend annually for decades, and it has a 2.6% dividend yield. It provides business customers with products and services that help them make better use of cloud computing and artificial intelligence. It is also working on quantum computing. However, given the company's age, this is not what IBM has always done. In fact, when it started business, it made "high-tech" things like scales.
If you haven't noticed yet, change is a key theme here. IBM has remained an industry-leading technology company by adjusting its business to the world around it. The most recent change was just a few years ago, when it exited some older consulting businesses to focus on cloud computing. That shift was highlighted by the $34 billion purchase of Red Hat. I bought IBM during the difficult transition period (and well before the Red Hat acquisition) because I believed the company would again be able to adapt to the market. And I'm confident it will do so again when it's needed.
Long-term dividend stocks have to be different
If you are like me and you want to buy and hold dividend stocks for the long term, you have to consider more than just dividend yield. The business that backs the yield is as important, if not more important, than the income you will generate from the investment. I like Enbridge, P&G, and IBM because they all have what it takes to adapt over time. That is what makes their dividends so resilient and makes me a happy long-term shareholder.
Reuben Gregg Brewer has positions in Enbridge, International Business Machines, and Procter & Gamble. The Motley Fool has positions in and recommends Enbridge and International Business Machines. The Motley Fool has a disclosure policy.