The recent stock market plunge has some investors concerned about their investments and even the overall health of the U.S. economy. But over the course of many investors’ lifetimes, markets sometimes go up and down, and the changes can happen quite quickly. If the recent volatility has you looking for more stable investments, consider a few established cash-generating companies with a long history of paying dividends. Here are three that you can probably buy and hold forever.
Supported by family
Ford Motor Company (NYSE: F) Ford has one of the most storied histories in the auto industry, but it’s facing a host of challenges right now. The company is struggling in China. It’s struggling to improve vehicle quality, leading the industry in U.S. recalls for three years in a row. And it’s losing billions each year on its electric vehicle (EV) division. But those challenges have given investors an opportunity to buy Ford stock at a bargain price. price/earnings ratio 10 times, with a dividend yield of over 6.1% at recent prices.
Despite its troubles, Ford has a clean balance sheet and strong cash flow from its gas-powered trucks, SUVs and commercial vans. The automaker also has $27 billion in cash and about $45 billion in cash on hand. That’s enough capital to invest in long-term growth strategies and return value to shareholders.
Ford has committed to returning 40 to 50 percent of its assets. free cash flow to investors. Unlike many companies that buy back their shares and pay dividends, Ford will almost certainly provide those returns solely in the form of dividends. That’s because the Ford family owns a separate class of stock that carries 40% of the voting rights as well as the dividend, which is widely known to be enjoyed by the family. For this reason, expect Ford to continue to focus on its healthy dividend.
Look at the chart below to see the difference in value between owning Ford stock and reinvesting its dividends, versus just the gains in its stock price.
Adapting to smoke-free
Faced with the decline of traditional cigarettes, Altria Group (NYSE: MO) Altria aims to offer adult smokers a variety of smokeless alternatives, including e-vapor, heated tobacco, and oral tobacco. This transition will not be easy or cheap, especially since investors have become accustomed to the cash cow that is cigarettes over the decades, but it is necessary for future growth. Altria already has a broad portfolio of smokeless products, including NJOY and LLC (which is currently the only e-vapor maker with marketing approval from the U.S. Food and Drug Administration).
Investors shouldn’t worry about tobacco’s decline for now, at least when it comes to dividend payments. Last year, Altria paid $6.8 billion in dividends and spent another $1 billion on share buybacks. Still, it reduced its debt-to-asset ratio and generated about $9 billion in free cash flow to cover it all.
As the company adapts to consumer preferences…
