Bert’s 5 Stocks to Buy Now, Always and Forever

stocks to buy

Over the years, I have learned a lot about investing.  One of the most important lessons is to always be prepared and have a watch list ready to go for when the moment strikes. That’s why Lanny developed a Top 5 Foundation Dividend Stock List early on to help identify those “cornerstone” companies that investors at all levels should consider for a strong DGI portfolio. Now, it is my turn to put together my own unique list of stocks to buy.

I created this list using the three simple metrics of our Dividend Stock Screener.  What’s unique about this list, versus our standard watch list, is that my goal is to create a long-term watch list. Thus, the timeframe of this watchlist is: forever. That way, when the market suddenly drops, I know where to look for investment opportunities.  See my 5 stocks to buy!

The Process for selecting the 5 stocks to buy

The first question on my mind was “where do I even start?”  Should I look exclusively at stocks I currently own or should I search for new stocks?  Should I set a minimum dividend yield?  You get the picture.  Here are the requirements I used for this list. These requirements didn’t narrow my pool down to just five stocks.  Especially since there are a lot of companies that meet the criteria listed below; however, based on the list below, I know that my selection of five stocks will come from a strong pool of high quality dividend growth stocks.  Here are the minimum requirements.

Company Has Increased Their Dividend for 20 Consecutive Years

Why are we dividend growth investors?  We are looking to build growing dividend income stream to propel ourselves towards financial freedom ASAP.  Therefore, for this listing, I want to focus on stocks that have a long-term history of increasing their dividend.  This ensures that we are focusing on companies that have conservatively managed their balance sheet to ensure an increasing dividend payment to shareholders through good times and bad.

I stopped short of including only Dividend Aristocrats on this list.  I didn’t want to exclude the great companies that are on the cusp of achieving this prestigious title.  Lowering the threshold to 20 years of consecutive dividend increases for this listing means that the company has increased their dividend during the Dot-com bubble, Global Financial Crisis, and potentially, the COVID-19 pandemic. A 20 year threshold easily achieves the criteria I am looking to achieve.

Payout Ratio Below 60%

This metric is one of the three metrics of our stock screener for a reason. We wouldn’t even consider investing in a dividend stock without first reviewing their dividend payout ratio. Yes, it is THAT CRITICAL of a metric.

We love dividends and focus solely on companies that pay a growing, sustainable dividend.  While we want as high of a dividend yield as possible, we would never want to invest in a company that is sacrificing the long-term safety of the company in order to reward shareholders in the short-term. Dividend growth investing requires a long-term mindset and patience. Paying an unsustainably high dividend with a payout ratio greater than 100% is a non-starter for us.

The dividend payout ratio sweet spot is 40%-60%.  We believe this allows a company to adequately invest their earnings back in the company while paying a strong dividend to their shareholders.  Our ears instantly perk once we see a payout ratio in that range.

Read: The Dividend Payout Ratio – Understanding this CRUCIAL dividend stock screeneing metric

No Oil-Related Companies

This, to me, is hilarious. When I initially published this post in 2015, I excluded oil companies to my weighting in the sector.  However, since the article was published,  the oil industry has twice experienced periods where the price of crude oil collapsed. I’m no longer exluding oil companies from my listing due to my portfolio weightings. Rather, I am excluding oil due to the unpredictability and wild swings of the price of oil.

In both instances, the price of oil collapsing caused companies I own to cut their dividend. In the first round it was Kinder Morgan and in the second round it was Occidental Petroleum and Royal Dutch Shell. The dividend cuts were absolutely devastating to our forward dividend income. We cannot control the price of oil, especially when private companies are competing with major state sponsored oil giants. Therefore, I simply cannot consider an oil company an always buy company for this reason.

Read: Dividend Cuts: Pandemic Impact on Lanny’s Portfolio

The Five Stocks to buy now, always and forever

Now it is time for the fun part. As I mentioned earlier, the process above identified a lot of great companies. It was honestly hard to narrow down the list to just 5 stocks to buy. However, with the five companies listed below, I am confident that I would always invest in a high quality dividend growth stock with a history of increasing their dividend.

Since the list was initially published in 2015, I have updated the stock information and metrics to keep the information current (Information current as of June 30, 2020) and discussed any significant changes to the company. After all, it has been over 5 years since this was initially published.  However, to keep some of the original character of the article and understand my mindset back when I created this list, I left some of the initial commentary for each stock.

Now, let’s dive into my 5 stocks to buy!

Company #1: 3M Company (MMM) – 3 Yr DGR: 8.44%, Consecutive Annual Dividend Increases: 61

3M, MMM

I purchased shares of 3M years ago and have continued to build my position in 2020. At the start of the pandemic, I was aggressively adding shares when the price was in the $140 per share – $150 per share range. This Dividend King has been one of my favorite holdings and I will continue to add while the price is right.

Read: Dividend Kings: Who & What are They

3M sports an amazing brand portfolio. Their brands include Post-It notes, Scotch Tape, Scotch-brith, FIltrete, and Nexcare. Those are just their strong consumer facing brands. 3M is a large, conglomorate with a great presence in the healthcare, manufacturing, energy, automotive, and many other industries.  The company’s strong product diversification and strength within each sector is the reason why it is always on my radar. When times are tough, the company has many levers to pull to generate revenue, cash flow, and support their dividend.

**2020 Update: 2020 has also been challenging as the impact of Coronavirus is being felt around the world. Even with that in mind, the company still has a solid dividend payout ratio that is in line with our stock screener.

Company #2: Emerson Electric (EMR) – 3 Yr DGR: 1.21%, Consecutive Annual Dividend Increases: 63

Emerson Electric is a diversified industrial company.  The company has two major divisions and classifications for the sectors they operate in: Automation Solutions and Commercial & Residential Solutions. Emerson operates worldwide and is on the forefront of bringing new technology, energy and industrial solutions to their customers. Once integrated, the company is not easy to replace. The high sticking power in diversified industries is very appealing to me.

I initiated a position in this Dividend King in 2015. Howevrer, I have not added to my position since. Unfortunately, the company’s dividend growth rate has slown to a screeching halt over the last few years. The dividend yield + dividend growth rate for the company continues to slide. This has been the one major knock against the company since I initiated my postion several years ago. 

**2020 Update:  EMR’s dividend growth continues to remain low.  I will consider replacing EMR by the end of 2020 if their dividend growth does not improve. I have a few ideas and tricks up my sleeve.

Company#3: Johnson & Johnson (JNJ) – 3 Yr DGR: 6.01%, Consecutive Annual Dividend Increases: 57 

JNJ, Johnson & Johnson, stocks to buy

Johnson & Johnson is one of our foundation stocks and the G.O.A.T for a reason!  JNJ has been paying and consistently increasing their dividend  for a long time.  Further, it seems like every recent dividend increase is in the mid to high single digit range!

Johnson and Johnson’s  impressive brand portfolio consists of items that are found in everyone’s households.  This is always a huge bonus for me, as I love consumer staple stocks.   The list includes Tylenol, Motrin, Zyrtec, Benadryl,  Nuetrogena, Aveeno, Rogaine, Lubriderm, and so on. Trust me, I could list plenty of more if I wanted to.

Like MMM and EMR, I have a solid position in the company;  but man would I love to receive over $100 in dividend income annually for this company. That will be my target goal as I continue to build my position in the coming years.

**2020 Update:  This may be my chance to add to my position in JNJ.  The company’s price is finally coming down and they have earned a place on Lanny’s Coronavirus dividend stock watch list.  Further, despite all of the dividend cuts due to the pandemic, Johnson & Johnson actually increased their dividend in April. That is why we love JNJ!

Company #4: Pepsi (PEP) – 3 Yr DGR: 8.32%, Consecutive Annual Dividend Increases: 48

stocks to buy, Pepsi

In 2014 I performed a stock analysis over the beverage giant and determined that the company was too expensive to purchase at the time. Years later though, the price fell and I had an opportunity to initiate the position.  Why did I consider Pepsi over Coke on this listing?  Even though PEP has a lower yield than KO,  I selected PEP instead due to the diversified product portfolio, and lower payout ratio.

Interestingly, this is still holding true over the years. In my mind, the Frito Lay product line is a HUGE benefit for the giant that sets it a part from their peers. The odds that a consumer is purchasing one of their beverages or snacking on a bag of their chips is pretty high. Personally, I love eating Doritos!  There snacks are delicious and so is their dividend yield and dividend growth rate.  How could you not add this Dividend Aristocrate to your “Always Buy” stock list?

Read: Dividend Aristocrats – Who & What are They

**2020 Update:  I added PEP to my portfolio a few years ago when the price fell below $100 per share.  Their share price came close to falling below this mark in March. However, like the rest of the market, it has just taken off. So for now, I will continue watching the company and patiently waiting for the right time to strike.

Company #5: Target (TGT)3 Yr DGR: 3.23%, Consecutive Annual Dividend Increases: 48 

stocks to buy, Target, TGT

This last spot was a tough one to fill and TGT barely edged out Caterpillar, which has made many appearances on our website over the last six months.  Here is what I said when I initially created this list in 2015:  “I chose TGT over CAT despite of the lower yield because TGT typically trades at a higher multiple, TGT would represent a new industry in my portfolio since I already own an industrial equipment company, TGT performed very well when we ran the company through our stock screener last year and TGT has been on a dividend growth tear over the last half-decade.  It is not that CAT is a bad company.  I just would prefer to use a sudden drop in prices to initiate a new position in a company that typically trades at a higher multiple.” 

That was quite the take when selecting Target. Over the last few years, Target has transformed and significantly improved their brand, product offerings, and consumer shopping experience. My wife is a religious Target shopper and has a Red Card. We are constantly shopping there for our household items. The company continues to make things better, easier, and faster for consumers, from purchase to returns. Their brand loyalty is strong as well. That, along with the fundamentals, are reasons why this company made the cut.

**2020 Update: Since I wrote this in 2015, TGT has become a large position in my portfolio.  It is one that I will hold for a long time.  The company has performed very well in the pandemic. Plus, our purchases at the store increased significantly since our daughter was born. We use Target brand diapers, formula, and all the other supplies we can. They are very cost effective for parents. After crunching the numbers and buying the stuff for our duaghter, it solidified Target’s position on this listing!

Summary

I’ve mentioned it now several time throughout the article. It is all about finding, and investing, in high quality dividend growth stocks with a history of increasing their dividend. There are plenty of great stocks to choose from. Cutting the list down to these 5 was difficult, but a lot of fun. Now it is time to put my pen down and start investing in these wonderful companies!

What are your thoughts on my list?  Do you have a list of stocks that you are always willing to purchase?  Would you have passed on any of the companies I included? Thanks everyone, I am looking forward to your comments!

-Bert

DISCLOSURE: I DO NOT RECOMMEND ANY DECISION TO THE READER or ANY USER, PLEASE CONSULT YOUR OWN RESEARCH. THIS IS ACTUAL DATA, ANALYSIS, HOWEVER I BASE NO INVESTOR RECOMMENDATION.  THANK YOU FOR YOUR UNDERSTANDING

36 thoughts on “Bert’s 5 Stocks to Buy Now, Always and Forever

    • Thanks Ken! And that’s the fun part, right? In order for me to jump on one of the stocks, I wold need to see a nice drop in share price from where they have been trading recently. Over the last 3-6 months, I would say JNJ and EMR have fallen to the point where I would buy them immediately. Great stocks at that great of a discount are just hard to pass up. I can also make the same argument for MMM as well, as I finally saw the price fall enouhg (below $140) to the point where I pulled the trigger and added some shares. PEP and TGT aren’t quite at that level yet for me. However, if the price were to fall 5% or so, I would gladly scoop them up!

      Thanks for stopping by. Have a great weekend.

      Bert

  1. Great idea and something I need to look at as well for my portfolio. I own all your choices except for PEP. I love Mt Dew though so I should look into it more. I do love the diversity of PEP compared to KO. If I had to add anything to the list it would be something along the lines of PG or UL just based on the products they make and the track record. Thanks for sharing your list!

    • It is a great excercise and it was a blast putting it together. It was like shopping for the most expensive items that you are planning on buying when they come on sale/clearance at the end of the season. Our monthly watch lists focus on stocks that are currently trading at a value, so it was nice to dive into the more expensive stocks for a change and see what other options are out there.

      The fun part is that there are about 50 stocks that I could have had on this list. I would have added PG and heck, I might buy some soon if the price continues to fall. However, their payout ratio was a little too high for the purposes of this article. The list focused on stocks with a payout of 60% or less. But you know me, I love consumer stocks…so you can’t go wrong!

      Thanks for stopping by!

      Bert

    • M,

      Thank you very much. Hopefully the criteria allowed me to pull from the strongest pool of dividend machines haha It was really hard to ignore XOM on this list, but I felt that I could use a downturn to further diversify my portfolio and bridge out into new markets. Especially considering that I own so many different oil stocks. But who knows, as I continue to build my portfolio elsewhere my allocation in oil may reduce enough to the point where oil suddenly becomes attractive enough again!

      Bert

  2. Thanks for sharing the List Bert. Would love to add any of those up there. Let’s hope for many more opportunities ahead of us. Keep hustling it up and can’t wait for more purchases you will be sharing with us. 🙂 Cheers bud.

    • HUSTLER!

      Thanks for stopping by. I wish I could buy the five names on the list RIGHT NOW haha Luckily, there will be plenty of opportunities over the years to come that will allow us to build these amazing dividend growth portfolios. Don’t worry about us here, we are going to keep on hustling until we reach financial freedom!

      Bert

  3. Bert-
    Nice list, though I would probably substitute someone for TGT. I own TGT and love the company, but my list would be all financial, industrial, and consumer goods + maybe healthcare. Anyways nice write up.

    Lanny-
    I was in Ohio literally moving at breakneck speed all the time. I have to hit a ton of tiny offices in a very quick window of time, sometimes 5 a day. Each being 1-2 hours apart, you get the idea. I saw downtown Cleveland just enough driving through, same for Akron and most other cities. I will say this, you guys need a hockey team in that city!

    – Gremlin

    • Thanks Gremlin! The fun part of this list is that there were so many companies to choose from. If not TGT, there were dozens of other stocks I could have selected. This list is going to evolve over the years as well, so we should see some names falling on or off of the list. Between WFC, USB, UL, PG, CL, and so on, there are are a ton of great companies to pick from instead of TGT!

      Wow that is a quick trip. So you were in a car getting shuttled around the whole time. Was it throughout the whole state or just in the Northeast Ohio region? If so, I am sure you saw more corn than you know what to do with. We actually do have a hockey team, it is just a minor league team. The closest NHL team is in Columbus, which is two hours away. Unfortunately, I don’t think the city could support a 4th major sports team as 3 is spreading it pretty thin.

      Hopefully you had a great business trip and will consider coming back for a vacation trip!

      Bert

      • Bert,
        It was a big circle around the whole state. I drive around and test equipment as needed in a bunch of locations. I went from the NE of Ohio and looped all the way around back to Cleveland.
        I must say Athens seemed like a really cool spot for hanging out. And of course need to see the Hall of Fames.

        There are a ton of good companies out there at good valuations too. Just need to get some more $ to put into play. I have more work travel, which I dislike the time away but I like the extra $ I save and make.
        -Gremlin

        • Sounds like you had an action packed trip. Athens is a fun college town to hang out it. What’s funny is that I live only 45 minutes away but I have never been to the Pro Football Hall of Fame. No excuses right there. But the Rock and Roll HOF, now that place is fun. I’m a huge classic rock fan, so walking through the exhibits never gets old. Well you will have to let us know next time you make it back and we can hopefully find a way to meet up.

          I’m with you, I wish I had more money to dump into the market right now. Definitely trying to scrape as much as I can together to get the dividend snowball rolling as soon as possible and to take advantage of the current sale.

          Bert

  4. I may have missed this but how often do you go back and review your list to make sure that these are still companies that belong on your Always Buy list? Obviously these companies are high quality and have strong histories but I would think you would review the list every so often to make sure they still fit the portfolio you are looking to build. Great idea!

    • No, you didn’t miss anything. I just didn’t address that topic haha My plan is to update this list annually or if one of the stocks falls out of flavor. You are absolutely right though, this stock needs to be maintained and updated so the information does not become stale and I can identify any weaknesses (or potentially other great companies) that deserve to be included on the list.

      Thanks for stopping by! Have a great weekend!

      Bert

  5. Well, happy to say that 4/5 of your “always buy” stocks are in my portfolio. I would have chosen CAT over TGT as you mentioned though. Still, it’s always good to have an idea of where you’d like to allocate cash when a sudden drop occurs. Sometimes, you don’t really have time to react and when you start to “think” about allocation analysis paralysis sometimes sets in. Thanks for sharing.

  6. I have similar requirements and also I keep a running tab on stocks I really want to own, but always seem to be the most over valued. If there is an entire market dip that has nothing to do with the underlying business itself, I want to capitalize on picking up the stocks that I want to own or add to but haven’t done so due to high prices. CVS was my choice on the flash crash.
    Devin
    P.S. I like and own all 5 and CAT.

    • Chimp,

      Nice choice with CVS. That’s the perfect stock for this kind of a list. Great dividend stock that has been on a tear recently and has traded at a premium. Why not use a broad market pullback to invest in that kind of a company when the price recedes and falls back to normal levels.

      That’s a great point and is similar to how I played the Greece scenario. Look for companies that are getting dragged down by market forces that have nothing to do with their business and cannot impact their free cash flow. If you can identify those companies, you can steal a great dividend stock at a reduced price.

      Thanks for stopping by!

      Bert

  7. Nice list, especially like MMM and JNJ. My “should have” stocks also are CLX, KMB, KO and PG. Of course, it also depends on what you already have in your portfolio!

    Now you’re ready for the opportunities Bert! 😉

    Cheers,

    Mike

  8. Hi!

    Thanks for the article. I, too, want to focus my buying during this downturn on a few names for the long term. I totally concur with MMM and JNJ. Thanks to you I am adding more to EMR today. Some of the others I consider core are UTX, SBUX, CL, CVX, CLX, CAT, CHD. These 10 are my favs.

    Thanks for the good work. Hope to hear more from you.

    Best,

    Jim

  9. Right now my investments are done through Wells Fargo because I do not have experience with the stock market. So basically I need advice. I have about 30K spread out in mutual funds and a Roth IRA. Should I ask my financial advisor about hand picked stocks? I can’t do anything too risky though, I am a single parent and want this money to grow for my son’s future. If anyone has any advice for me I would really appreciate it! I’m trying to learn more about the market and just want to be sure I’m going the right direction. Thanks!

  10. JNJ and TGT yes, but MMM EMR and PEP looks a bit overvalued trading well over 20 P/E. MMM looks a bit flat while PEP and EMR even declining on sales. Actualy TGT has some issues as well (sale decline) but their P/E is atractive enough to bet on their recovery in the long run.

  11. Can’t agree more. These are some great companies to invest in. One of my all time favorite stocks is JNJ.

    And no to oil is very smart, but I still believe in my BP. BP is a very “with the times” company that is investing and integrating more into renewable energy. At the end of the day they are a company that relies heavily on one of the most sought after and politically observant resources, oil.

    10 years ago I invested a significant amount into an oil company called Weaterford (WFT). A few weeks ago they declared Chapter 11…….. so much for going long with them.

    • Galizer,

      Thank you. What stocks are considered your “always buy.” Oil is interesting. I’ve added selectively over the year when I can get my hands on a great company at a great price (XOM). However, I think I am done messing around with oil companies that are not large, integrated oil companies. Your WFT experience is part of the reason why I am sticking to household names.

      Bert

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  17. I keep hearing people LOVE Johnson & Johnson (JNJ). I might need to be adding some to my portfolio when the price is right! This is a great post as I’m updating my watchlist!
    -Andrew

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