BROUGHT TO YOU BY MARKETBEAT

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BROUGHT TO YOU BY MARKETBEAT.COMWRITTEN BY THOMAS HUGHES

Buy And Hold, It’s The Warren Buffett WayBuy and hold is the easiest strategy of investment there is. The idea is simple, buy a stock and holdit forever while it helps make you rich. In theory, it’s a great concept but in practice buy and holdis a little bit harder to do. Great investors like Warren Buffet have succeeded where others haven’tsimply because they take the time to ferret out the best-run companies in the best markets.The difference between Warren Buffet and the average investor is that it’s Warren’s job to ferret outthose companies. Most average investors are busy with work and family and don’t have the time,that’s where we come in. In this eBook, we’ll give in-depth detail to the what, who, and why to buyfor seven (7) of the best buy-and-hold-forever stocks on the market today.Dividends Are What Make A Stock An AssetDividends are at the heart of what makes a great buy-and-hold-forever stock. Dividends arepayments from the business, usually earnings, to its shareholders, and the difference betweeninvesting and speculation. You want to invest in assets that pay you to own them, not speculate onsome future growth target that may or not be reached.When it comes to dividends, stability is the #1 concern, distribution growth the 2nd. You alwayswant to be sure your payouts are safe for two reasons. The first is that you don’t want your yieldon-investment, the original yield on the stocks you’ve purchased, to ever fall. The second is thatyou want to protect your capital and dividend decreases, pauses, and suspensions are not the wayto do that.Regarding dividend growth, dividend growth is a sure path to ever-increasing returns regardingyield and capital gains. A stock that is in a cycle of dividend-growth usually sees its share pricesmove higher to match. The idea is if the stock is worth X while paying Y, X should increase relativeto Y over time.2

What Makes A Stock Worthy Of Holding Forever?When you think about it, just about any company could be a buy-and-hold-forever kind of stock.But they aren’t. That’s what makes growth investing so difficult. For us, the best place to begin asearch for a company that will last forever is with a group of companies that have been around for,well, just about forever.The best group to start with is neither industry nor a sector but a quality of company known asDividend King. Dividend Kings are stocks that have been paying and increasing their dividendpayouts for at least 50 years. 50 years is a long time and helps establish a few basic facts aboutthe stock before you even consider individual companies.The first is that the business is blue-chip quality and able to withstand economic and marketups and downs. Think about it, over the last 50 years Dividend Kings have seen countless wars,numerous disruptions, dozens of market sell-offs, a handful of recessions, and not only paid butincreased the dividend every year. Pretty impressive.The second is that, in order to be a Dividend King, the company and management are committedto dividend payments and ever-increasing distribution amounts. That’s important because somecompanies will raise a dividend in times of good only to lower it in times of downturn. That’simportant for stability, not only of the payment but of share prices. In 2020, there are 29 DividendKings across a diverse range of sectors so there are plenty to choose from.The one drawback to the Dividend Kings is that many yield lower than the average S&P 500company. In that vein, it may be better to invest in an S&P 500 index fund but it’s not. It’s better totarget the higher-yielding ones like Altria, Federal Realty, 3M, and Coca Cola. Of these, Coca Colastands out as a favorite because of its positioning within the consumer market, consumer, andeconomic trends in the post-pandemic world.3

1The Coca-Cola Company (KO)57 YEARS OF SUSTAINED, CONSECUTIVE DIVIDEND INCREASESThe Coca-Cola Company is the parent to all-things Coke related. Everything from the soda inyour glass to the signs on the street generates revenue for this company in some way. Unlikecompetitors Pepsico and Keurig-Dr. Pepper which have had to turn to mergers and productdiversification to fuel growth, the Coca-Cola Company is still a pure-play on beverages. And it’sbeen increasing its dividend on a regular, consistent, annual basis for 57 years.In addition to Coke, the beverage company manufactures, markets, and sells various nonalcoholicbeverages worldwide. The Coca- Cola Company provides sparkling soft drinks; water, enhancedwater, and sports drinks; juice, dairy, and plant-based beverages; tea and coffee; and energy drinksto consumers worldwide.The Coca-Cola Company also offers beverage concentrates and syrups, as well as fountainsyrups to fountain retailers, such as restaurants and convenience stores. The company sells itsproducts under the Coca-Cola, Diet Coke/Coca-Cola Light, Coca-Cola Zero Sugar, Fanta, Fresca,Schweppes, Sprite, Thums Up, Aquarius, Ciel, Dasani, glaceau smartwater, glaceau vitaminwater, IceDew, I LOHAS, Powerade, Topo Chico, AdeS, Del Valle, fairlife, innocent, Minute Maid, Minute MaidPulpy, Simply, ZICO, Ayataka, Costa, dogadan, FUZE TEA, Georgia, Gold Peak, HONEST TEA, andKochakaden brands.THE EARNINGS OUTLOOK: Other than a small hiccup in calendar 2020 related to theCOVID-19 pandemic The Coca-Cola Company is on track to deliver sustained, incremental,YOY growth in both revenue and EPS for the foreseeable future. Revenue growth should trendin the 7% to 10% range with EPS running at a much higher 10% to 20% through 2025.THE DIVIDEND: Coca-Cola Company is a Dividend King with 57 years of consecutivedistribution increases to its credit. The stock is yielding a nice 3.63% while trading near 45with every expectation of future increases.The payout ratio, a basic measure of the dividend’s sustainability, is running a bit high at 87% ofthe calendar 2020 EPS but there is a catch. The company’s cash position is more than sufficientto cover any hiccups in business and the outlook for next year is upbeat. Based on consensus, thepayout ratio will fall to a more reasonable 78%. Any worry left at this point should be laid to rest bythe balance sheet. The company’s cash position, debt-management, and coverage ratios ensurethis dividend is dependable.4

2Pepsico Inc (PEP)48 YEARS OF SUSTAINED, CONSECUTIVE DIVIDEND INCREASESThere is a reason why Pepsi is on this list and not just because of its 3.10% dividend yield. Somemarketing genius, a long time ago, figured out that sales of both Coke and Pepsi were higher whenthe products were offered side by side. The idea is that, if faced with a Coke or a Pepsi machine, thedecision is between having a soda or not having a soda. When Coke and Pepsi machines are side byside the decision becomes “will I have a Pepsi or a Coke?” At that point the consumer has alreadydecided that soda will in fact be purchased, now it’s just a matter of choice.Unlike Coke, PepsiCo, Inc. operates as a food and beverage company worldwide. The companyoperates through seven segments manufacturing and selling branded dips, cheese-flavored snacks,and tortillas, as well as corn, potato, and tortilla chips; cereals, rice, pasta, mixes and syrups, granolabars, grits, oat squares, oatmeal, rice cakes, simply granola, and side dishes; beverage concentrates,fountain syrups, and finished goods; ready-to-drink tea, coffee, and juices; and dairy products.Pepsico Inc provides its products primarily under the Cheetos, Doritos, Fritos, Lay’s, Ruffles, Tostitos,Aunt Jemima, Cap’n crunch, Life, Pasta Roni, Quaker Chewy, Quaker, Rice-A-Roni, Aquafina, DietMountain Dew, Diet Pepsi, Gatorade, Mountain Dew, Pepsi, Propel, Sierra Mist, Tropicana, 7UP,Gatorade, Pepsi, and Pepsi Black brands.The company serves retailers and consumers through a network of direct-store-delivery, customerwarehouse, and distributor networks, as well as directly to consumers through e-commerce platformsand retailers. The company was founded in 1898 and is headquartered in Purchase, New York.THE EARNINGS OUTLOOK: The earnings outlook for Pepsico Inc is much the same as forThe Coca-Cola Company. Aside from a small and perhaps negligible hiccup in calendar 2020the company is on track to produce incremental sustained growth in both EPS and revenue forthe foreseeable future. Growth in both EPS and revenue will lag that of Coke but EPS growthaveraging 10% for the next five years isn’t bad for any company with annual revenue in the 70billion range.THE DIVIDEND: While not a true Dividend King Pepsico Inc is a 3%-paying Dividend Aristocraton the verge of Kingship. This company has been steadily increasing its distribution for 48years and clearly on track to make it a 49th. The payout ratio is a bit lower than Coke’s at 77%of this year’s EPS and 70% next and those figures are backed up with a solid balance sheet.The balance sheet is almost as pristine as Coke’s. If not for Pepsico’s semi-aggressive acquisitionfocused growth strategy cash and coverage would be equally good so there is a trade-off. Regardless,cash, debt, and coverage ratios are all in-line with sound financial standing so no worry about thedividend or future increases here.5

3Clorox (CLX)A DIVIDEND PRINCE WITH A DENTED CROWNClorox is the single-best positioned consumer staples stock in the market today. The company isthe owner of the single most recognizable consumer disinfectant brand in the world and seeing maddemand because of the COVID-19. A company spokesperson revealed demand for some productsexceeded 500%, a situation that is not likely to change in the near future.What many don’t know is that Clorox is the owner of several other consumer brands that can belabeled essential for pantry-loading and stay-at-home, as well as for life in general. Among them areClorox, Formula 409, Liquid-Plumr, Pine-Sol, S.O.S, and Tilex brands; naturally derived products underthe Green Works brand; and professional cleaning, disinfecting, and food service products under theCloroxPro, Dispatch, Clorox Healthcare, Hidden Valley, and KC Masterpiece brands.Clorox also provides charcoal products under the Kingsford and Match Light brands; bags, wraps,and containers under the Glad brand; cat litter products under the Fresh Step, Scoop Away, and EverClean brands; and digestive health products under the RenewLife brand. Clorox also markets waterfiltration systems and filters under the Brita brand; natural personal care products under the Burt’sBees brand; and dietary supplements under the Rainbow Light, Natural Vitality, and Neocell brandsTHE EARNINGS OUTLOOK: Unlike many other companies Clorox will not only see revenuegrowth in calendar 2020 but revenue growth acceleration. The boost in revenue is not expectedto slow for many reasons, most tied to the pandemic. Aside from increased demand forcleaners, disinfectants, and household products Clorox is now in demand as a partner for otherbusinesses. Several big-name companies including an airline and a cruise-line have alreadypartnered with Clorox to ensure sanitary conditions for their clients and customers.THE DIVIDEND: Clorox isn’t a Dividend King or even a Dividend Aristocrat but that doesn’tmatter. The company’s history of dividend payments shows 31 years of regular increaseswith no decreases ever. Most recently, Clorox has managed to sustain 18 years of distributionincrease which puts it firmly on track for Dividend Aristocrat status (25 years of sustainedincreases). Regardless, the 2.0% yield is supported by a low 65% payout ratio and that ratio isprojected to get smaller (assuming no more dividend increases).6

4Abbott Laboratories (ABT)AN ARISTOCRAT BY ANY OTHER NAME WOULD PAY AS WELLAbbott Laboratories is one of our favorite stocks of all-time. The company is in business as a staplehealth care company servicing the needs of consumers and professionals alike. Products range fromdietary supplements through medical devices and therapies and its future success is all but assured.Not only is America’s (and the world’s) population growing, it is aging and spending more and moreon healthcare on a per capita basis. All things that bode well for Abbott Laboratories’ future earnings,dividend payments, and future distribution increases.THE EARNINGS OUTLOOK: There is nothing to not like about Abbott Laboratories’ outlook forearnings. The company will see a slight hiccup in 2020 that may not even be felt, beyond thatthe outlook is for steady moderate to robust growth for the foreseeable future. Regarding 2020,the current consensus for revenue is -1.85%. Based on the first-quarter results, the consensusfor 2nd quarter results, and the comparison to last year’s 3rd and 4th quarter this company willeasily beat consensus.THE DIVIDEND: You like Abbott Laboratories because of the business, you love it becauseof the dividend. Abbott is one of the best dividend-paying stocks on the market, not matterthe short six-year history of increases. What the stats don’t reveal is that Abbott has only everincreased its dividend. Yes, if you look at the history there was a big distribution cut in 2013but there is a mitigating factor. In 2013 Abbott spun off its bio-pharma unit creating AbbVie.Shareholders of Abbott got not only shares in this new company but also stock in a newdividend-grower. If you count the years of increases before the spin-off, the years of increasesafter the spin-off, and 7 years of increases from AbbVie, Abbott more than qualifies forAristocrat status.DIVIDEND GROWTH HISTORYAbbVie Spin Off7

5AbbVie (ABBV)A DIVIDEND ARISTOCRAT IN THE MAKINGAbbVie Inc. is the perfect complement to Abbott Laboratories and a high-yield dividend payer. Thecompany discovers, develops, manufactures, and sells pharmaceuticals globally. The companiesleading drugs include HUMIRA, SKYRIZI, RINVOQ, IMBRUVICA, VENCLEXTA, VIEKIRA PAK,TECHNIVIE, SYNAGIS, and CREON among others. The company was incorporated in 2012 as part ofits spin-off from Abbott Laboratories and is based in North Chicago, Illinois.THE EARNINGS OUTLOOK: AbbVie has one of the best outlooks for earnings of any stockon the market. The company is expected to produce high-double-digit EPS and Revenuegrowth in 2020 and 2021 with the longer-term outlook equally robust. Revenue is supportedby a robust portfolio of treatments and a flush pipeline that ensures new treatments will beavailable long into the future. Oddly enough, AbbVie trades at a relatively low multiple for sucha high-growth stock so there is a value to be had as well.THE DIVIDEND: AbbVie is a budding Dividend Aristocrat and well-positioned to effectaggressive distribution increases for many years to come. The stock yields about 4.75% withshares prices near 99 so it is a nice addition to any income portfolio. The payout ratio islow at 45% and will trend lower over the coming years assuming no further increases areforthcoming. Regarding increases, the 5-year CAGR is running above 20% and likely to remainhigh for the foreseeable future. Assuming the consensus figures for next year are correct,AbbVie will have to up the payout by 14% just to keep the payout ratio flat.8

6Apple (AAPL)IF YOU DON’T OWN APPLE YOU NEED TOTechnology is one of the most important aspects of our lives. If that wasn’t the case in the preCOVID world it certainly is now. The problem with tech investing is that it is hard to know what techto buy, which tech will last, and not many pay dividends. And yet tech is still an important part ofour lives and should be included in any buy-and-hold forever portfolio. That’s why we like Apple.Apple embodies everything there is to love about tech and more. It is a consumer company with itsfinger on the pulse of what people want. If you can’t count on a certain tech to last forever you cancount on the world’s largest consumer tech company. And don’t forget about the cash pile. Appleis the most capitalized company on the planet with billions in cash sitting around just waiting to beused, or returned to shareholders.A look at the balance sheet is jaw-dropping. If you want to know what a fortress-balance sheet is,this is it. The company is sitting on more than 21 in cash per share, the debt to free-cash-flowratio is running near two (2), and the coverage ratio is above 20. Bottom line, Apple is in no dangerof anything other than laziness, and there is no indication this company is ready to rest on itslaurels.THE EARNINGS OUTLOOK: Apple was among the very first to begin shuttering stores whenthe COVID-19 pandemic broke out and it will not emerge unscathed. That said, the company’sgrowth in 2020 will only be reduced, not eliminated, to around 2.0%. Looking forward, theconsensus is Apple will rebound strongly from the pandemic and emerge with greater marketshare and re-invigorated demand. The longer-term outlook is also bullish with a mid-singledigit outlook for revenue and a high-single-digit outlook for earnings growth for the next tenyears.THE DIVIDEND: Apple is by no means a high-yielding stock, the payout is less than 1.0%,but it has a dividend and it is the safest payout on Wall Street. Not even considering thecash position, the company is only paying about 25% of earnings with very little debt or otherobligation to hamper payments. Apple has also established itself as a dividend-grower havingincreased the payout each of the 7 years since the dividend was initiated. The best part isthat Apple has been increasing at a low-double-digit rate, near 10%, so investors can count onan increasing yield-on-investment long into the future.9

7KLA Corporation (KLAC)BUILDING THE INFRASTRUCTURE OF TECHNOLOGYKLA Corporation is a play on tech that doesn’t depend on the tech itself. At least not the forwardfacing consumer-tech people tend to see and investors tend to gush over. Building on the ideathat consumers are fickle, that tech rapidly changes and knowing which tech companies willstand the test of time KLA Corporation is a play on the infrastructure of tech. If you’re thinkingsemiconductors and chips you’re close but dig a little deeper.KLA Corporation builds the machines and components the chipmakers use to make their chips. Wemay not know which tech companies will last, or what kind of chips we’ll need next year, but we willalways need the machines and technology to build chips, for whatever purpose they are for. KLACorporation is more than a blue-chip in this regard, it is fundamental to the entire tech ecosphere.Without chips, there is no tech.THE EARNINGS OUTLOOK: Demand for chips and chip-making supplies can be seen inKLA Corporation’s results. The company is on track to deliver 25% revenue growth in 2020despite the pandemic. Looking forward, growth will slow a bit in 2021 before resuming near10% annually the year after. Longer-term, KLA Corporation is expecting to see steady if notrobust growth for many years driven by the accelerating shift to digital. The pandemic, ifnothing else, has proven the need and utility of the internet and that is fueling a faster pace ofadoption than seen previously. Add to that an expected boom related to 5G and the Internet ofThings and KLA Corporation’s long-term health becomes even more certain.THE DIVIDEND: I wouldn’t call KLA Corporation an exciting dividend or a high-yield dividendbut I would call it incredibly stable. The stock yields about 1.5%, a bit shy of the broad marketaverage, but the forecast for distribution increases is excellent. Starting with the balancesheet, KLA Corporation is reminiscent of Apple in that it carries a large cash balance, a highcoverage ratio, and low levels of debt. The history of payouts shows 10 years of aggressivegrowth that has the CAGR running above 15% and the payout ratio at a mere 33%. Lookingforward, dividend-growth investors can anticipate many more years of distribution increases.10

for seven (7) of the best buy-and-hold-forever stocks on the market today. Buy And Hold, It’s The Warren Buffett Way Dividends Are What Make A Stock An Asset Dividends are at the heart of what makes a great buy-and-hold-forever stock. Dividends are payments from the business, usually