7 STOCKS TO BUY AND HOLD FOREVER

Buy and Hold Stocks for Profits

Buying and holding stocks for an extended period, often years if not decades, is the foundation of investing because it is investing, not trading, speculating, or gambling. Investing means putting your money into a well-run operation with the expectation of a consistent return over time. The return could be capital growth, capital returns, or both, but it is a real return that investors can bank on for their retirement.

Buy-and-hold investors must focus on well established, blue-chip quality businesses or brands that will stand the test of time. These businesses can deliver a consistent return regardless of market conditions, including growth, dividends, and share buybacks. Dividends are central to buy-and-hold investing because that is how most blue-chip companies share profits with shareholders.

Dividends offer an excellent return on invested dollars, help investors offset inflation, accelerate portfolio growth with reinvestment, and reduce stock and portfolio volatility. Dividend-paying buy and-hold stocks tend to trade with far less volatility than the average S&P 500 company because their investors, like their management, are focused on the long term.

7 Stocks to Buy and Hold Forever

What makes a great buy-and-hold stock? In hindsight, shares of Amazon, Apple, Microsoft, and even Facebook seem like good buy-and-hold stocks because of the meteoric rise in their share prices. However, they were once very risky tech startups, the kind of stocks that buy-and-hold investors would avoid. For every Apple, there are 100 other investments that never got off the ground.

A great buy-and-hold stock typically has a history of strong and stable financial performance, a healthy balance sheet, and consistent dividend payments. They also usually have a competitive advantage in an industry or market sector with persistent demand. These key criteria help companies withstand economic fluctuations and deliver returns over the long haul.

Dividend-Paying Companies Want You to Buy and Hold

Dividend payments and regular annual dividend distribution growth are good ways for a publicly traded company to foster buy and-hold investing. If the dividend grows regularly, investors can expect an everincreasing yield on their original investment and get accelerating total returns with dividend reinvestment.

Dividend growth can also drive the stock’s value higher. A stable payout worth 2% of the stock price is still worth 2% in yield when the distribution increases, all else being equal. If the stock price is too low after the dividend increases, the market will move higher to bring the yield back into alignment. Over 25 or even 50 years that can significantly impact the share price.

Two notable groups of dividend growth stocks are the Dividend Aristocrats and Dividend Kings.

Dividend Aristocrats comprise approximately 65 companies that are members of the S&P 500 and have raised their dividends for at least 25 years. Dividend Kings are a more exclusive group, typically comprising around 30-40 companies that have increased their dividends for at least 50 years. Unlike Dividend Aristocrats, Dividend Kings don’t have to be included in the S&P 500.

Dividend Aristocrats and Kings have proven themselves as consistent dividend payers regardless of economic conditions, a fact proven during the COVID-19 pandemic. The list of Dividend Kings and Dividend Aristocrats grew longer, not shorter, during the pandemic, even while dividends were being cut and suspended across sectors and industries. For income investors, that’s the news that counts.

Let’s look at seven stocks to see why investors buy and hold them forever today.

APPLE: WORTH A BITE OR TWO

Apple Apple Inc. (NASDAQ: AAPL) has matured into a high-quality dividend payer and among the bluest of blue-chip tech stocks. Having increased its dividend payouts for at least ten consecutive years, Apple is a Dividend Achiever, and is on track for inclusion into the Dividend Aristocrats in the mid-2030s.

Apple stock tends to pay less than 1% in yield but, more importantly, only 15% of its earnings, an important metric for dividend investors. The payout ratio measures how much a company’s earnings are paid out as dividends. A 15% payout ratio is considered low, meaning Apple has ample room in its cash flow to increase the payout for many years without earnings growth and maintain a healthy ratio. With earnings growth, Apple could increase its pace over time. Most Dividend Kings pay out 60% to 70% of their earnings.

Apple also buys back shares, which increases the value of the capital return program. The company increases the buyback regularly and will likely continue buying back shares long into the future. In 2024, shares were down an average of 2.4%, with repurchase activity expected to reduce the count further over time.

Apple’s balance sheet is rock-solid, a hallmark of buy-and-hold companies. It carries debt, like most tech companies, but leverage is low, debt is declining, and the cash balance is enormous. The company tends to carry a large amount of cash and has incredible financial flexibility.

Analysts like Apple, another good indication of buy-and-hold quality. They keep the stock pegged at a Moderate Buy with a consensus target that tends to trend higher, albeit not without periodic softening. This is important to note because 34 sell-side analysts cover the stock, which means quite a bit in total ownership and volatility. Institutions also tend to like Apple and own more than half of the company, which is quite an achievement for one of the widest-held buy-and-hold stocks among retail investors.

Artificial Intelligence (AI) is a long-term driver for Apple shares. Although Apple is not a chipmaker, it will be among the leading AI service providers—the largest and fastestgrowing segment of the AI market over the long term. The story in 2025 is about expanding AI services and their impact on revenue and earnings quality, which is expected to widen the margin over time.

WALMART: A KING OF RETAILERS

Walmart Inc. (NYSE: WMT) was crowned Dividend King just a few years ago.

The company joined the ranks of America’s and the world’s top divided-paying stocks, increasing ownership of its stock through indexing. Billions of investors’ funds are earmarked for Dividend King stocks that now include Walmart. The payout is running at the low end of the range, near 1.25%, due to the run-up in share prices in 2023 and 2024. Conversely, the valuation is running hot near 27x due to the company’s persistent growth, outperformance, and market share gains driven in part by industry consolidation during the pandemic and inflation/high interest rates following.

The company currently pays out only 35% of its earnings, leaving plenty of room in the cash flow for future distribution increases even with its debt load. Walmart carries a lot of debt, but the leverage ratio is low relative to its size and tends to run in the low-single-digit range. That is safe and manageable.

The only drawback is that distribution increases have slacked off to a tepid 2% range, which is expected from mature dividend growers. There are other high-quality dividend stocks in the retail world, including Costco and Target, but there are differences to consider.

The difference is that Costco’s 0.65% yield costs nearly twice as much relative to earnings than Walmart’s larger yield, and Target gives no exposure to the membership club universe. The rise of inflation following the pandemic has shoppers flocking to discount names like Costco and Sam’s Club (owned by Walmart), and you can see that strength in the company’s results.

The analysts keep Walmart pegged at a Moderate Buy, although the price target will fluctuate with economic conditions. The price target also tends to trend higher, leading the market in 2024

PEPSICO : STANDS OUT AMONG CONSUMER STAPLES YIELD

PepsiCo Inc. (NASDAQ: PEP) is a highquality consumer staples stock, and that is saying something for a sector filled with high-quality dividend growers. It is the world’s largest diversified consumer staples company, a Dividend Aristocrat, and a Dividend King.

PepsiCo offers several advantages, making it a more attractive buy-and-hold forever stock than its closest competitor, The Coca-Cola Company. While both companies remain focused on their core beverage strategies, Coca-Cola has doubled-down on beverages and expanded into verticals outside soda.

PepsiCo went a different route and diversified into snacks by acquiring Frito-Lay. It has since built on that strategy by adding Quaker Oats and other snack brands.

Today, PepsiCo is reinvigorating its growth outlook by expanding into new verticals, including Mexican-American Food–a multi-billion dollar industry that provides a path to sustainable mid-singledigit annual revenue growth. Another advantage of investing in Pepsico versus Coca-Cola is the dividend.

The underlying metrics, including a lower payout ratio and slightly higher growth CAGR, are better, resulting in stock price outperformance over time. PepsiCo stock price outperforms Coca-Cola Company in the 1-year, 5-year, 10-year, and 20-year periods.

JOHNSON & JOHNSON: DIVERSIFIED HEALTHCARE EXPOSURE

Incorporated in 1886, Johnson & Johnson (NYSE: JNJ) is one of the oldest and best-run healthcare companies. After its spin-off of Kenvue, Johnson & Johnson operates in two thriving segments: Pharmaceuticals and MedTech.

Both segments are supported by the triple tailwind of a growing and aging population that is deepening their use of medicines and medical products. Regarding dividends, Johnson & Johnson has an attractive payout relative to the broad market and other Dividend Kings.

The stock pays nearly $5 per share in 2024 after 61 consecutive annual increases, yielding more than 3%, trading at a value to the S&P 500. The stock is also a value relative to its historical valuation and yield, which is what really matters. Regarding the comparisons to other Dividend Kings, the 3.0% yield is above average and comes with some of the most attractive metrics in the group.

The payout ratio is only 45% of the earnings outlook, which means ample room for dividend increases at a higher-than-average pace, assuming earnings growth is in the picture, and it is. The distribution CAGR is running near 6%, which isn’t fast, but it is double what you get from the average King. The analysts’ sentiment for Johnson & Johnson shifted in 2024– first negatively, then positively, providing a tailwind for 2025.

The shift includes numerous price target revisions that lift the consensus average and lead the market higher. Like Walmart and PepsiCo, Johnson & Johnson’s beta is near 0.5x the S&P 500, half as volatile as the average S&P 500 stock.

CISCO: FUNDAMENTAL TO THE INTERNET

Founded in 1984, Cisco Systems (NASDAQ: CSCO) is one of the youngest companies on this list. The news for 2025 is that it is gaining market share.

This blue-chip tech company makes a wide range of IP-based hardware and software used by businesses and industries of all stripes, which are in high demand because of digitization, automation, and AI. Cisco’s networking and routing equipment is fundamental to the Internet and the Internet of Things (IoT), edge computing, and AI.

AI is a tech revolution leading to a global infrastructure overhaul that will last at least the next decade. Cisco’s ethernet routing and enterprise routing devices, software, applications, and services are central to its development and ability to advance. Another of Cisco’s attractive qualities is the ongoing business transformation from a pure-play product company into a diversified products and services company with significant subscriptionbased recurring revenue.

Growth stalled in calendar 2024 due to end-market inventory normalization of core product lines but is reverting to growth in 2025. The forecast is for mid-to-high single-digit top-line growth and a wider margin. Along with its positioning as an AI infrastructure player, Cisco is on track to become a dividend aristocrat, which helped it earn its spot in this lineup.

Cisco is among the higher-yielding names in tech and on this list, paying a safe, reliable distribution at a relatively low valuation. The stock has been trading near the mid-teens, about half what you pay for the mega-tech headliners. The company has been increasing its distribution for 13 consecutive years, so it has high expectations for additional annual increases. The dividend distribution is less than 50% of earnings, which is another plus, and the outlook for revenue and earnings growth is positive.

The balance sheet offers no red flags. Cash fell following the Splunk acquisition, but leverage remains low at 2x cash and 0.45x equity. The cash flow is solid, so the impact will soon pass. Regardless, cash flow is sufficient to sustain share repurchases and dividends.

DICK’S SPORTING GOODS: A WINNER THAT KEEPS ON WINNING

Dick’s Sporting Goods (NYSE: DKS) emerged as a winner in the wake of the pandemic due to its position in retail as a sporting goods pure-play. The underlying story, however, is one of execution and growth that was only amplified by the pandemic.

The company has been outpacing consensus growth estimates for years due to eCommerce, an expanding footprint, and deepening penetration while sustaining solid margins and capital returns. Dick’s Sporting Goods is a high-quality dividend grower and a slam dunk for investors, up triple-digits since 2020 and still undervalued.

The company has increased its dividend at a double-digit pace for a decade and can continue to do so because of the low payout ratio. The payout ratio is near 30% at the end of 2024, and the rate is expected to be sustained with a substantial distribution increase in mid 2025. Dick’s Sporting Goods is a blue-chip retailer trading at a discount to its peers and the broad market. Trading at 15x earnings, it aligns with Target, which is struggling and is half the valuation of Walmart.

DKS isn’t comparable to Walmart but deserves a higher multiple than Target given its dominant position, market share gains, growth trajectory, cash flow, and aboveaverage capital return. The capital return includes share repurchases, which reduced the count by an average of 4.5% in 2024. Analysts’ sentiment toward Dick’s Sporting Goods is positive.

Nearly two dozen analysts raised the consensus sentiment from Hold to Moderate Buy in mid-2023 and kept it steady in 2024. The price target is trending strongly higher, with 2024’s revisions placing the market above $250 by the end of 2025.

DUKE ENERGY CORPORATION: POWER RETURNS FOR YEARS

Duke Energy Corp. (NYSE: DUK) is another high-quality, blue chip stock on track to become a Dividend Aristocrat.

Above that, it is a reliable dividend payer that has issued a quarterly dividend on its stock for 96 consecutive years, so payouts are reliable even if the distribution wasn’t growing. Regardless of distribution growth, the high yield, reliability and ultra-low beta of 17x make it an attractive stock for diversification, yield, and risk reduction.

The payout ratio is high at 75% but isn’t a concern as it would be with a typical S&P 500 company. Duke Energy is a utility, and utilities are known to pay out larger earnings ratios because of their highly visible, regular cash flows. Duke Energy’s payout ratio is in line with other utility companies and not surprising.

The outlook for earnings growth is solid, also offsetting the high ratio, and supported by a trend of rate increases. Duke Energy’s position as a real asset is attractive to investors. Real assets include utilities, infrastructure, and commodities that provide diversification and defense against unavailable inflation through average stocks.

Duke Energy’s product is heavily regulated by the government and includes protections for revenue and margin that provide a tailwind for the business and safety for investors.

Buy-and-Hold Stocks are Proven Winners

Buy-and-hold investors rely on their income to drive market-beating total returns over time. The best buy-and-hold stocks are proven winners like the stocks on this list. Blue-chip dividend stocks like the Dividend Aristocrats and Dividend Kings are good places to find them. Proven winners may see ups and downs in business and share prices, but the underlying fundaments are sound: healthy balance sheets, consistent dividend payments, and a strong management team.

One of the easiest ways to identify a buyand-hold stock is to examine the company’s dividend health and distribution increase history. Companies with proven track records of payments and annual increases are more likely to sustain future payments and increases than others.

Dividend increases are important for buyand-hold investing because they add value, compounding returns over time. Dividend increases also help reduce market volatility by attracting buy-and-hold investors, who are unlikely to sell at the drop of a negative headline.

The Dividend Aristocrats have proven they can sustain dividend increases through thick and thin for 25 years, and the Dividend Kings are even better positioned. Through sustained dividend increases for 50 years, they have established their commitment to paying a regular and growing dividend. They can do it because of their market position, product demand, and operational quality. If these stocks sound like what you want, now is the time to invest.