Holding stocks for a long period of time is the most reliable way to generate strong returns in the stock market. It is often said that time in the market is more effective than trying to time the market.
For those looking for long-term investments, dividend stocks are an ideal option for several reasons. These stocks are typically associated with stable businesses that experience less volatility compared to high-growth stocks. This stability can help keep turnover low in an investment portfolio. Additionally, dividend stocks provide a consistent stream of income, which can help buffer returns during market downturns and cyclical upturns.
With these benefits in mind, two safe dividend giants that could be valuable additions to a retirement portfolio are McDonald’s and Procter & Gamble.
McDonald’s is not just your average value stock with a long dividend track record. The fast-food giant is currently experiencing impressive growth numbers, with a 9% increase in comparable-store sales in the most recent quarter. This growth can be attributed to improvements in McDonald’s ordering and dining experiences, which have raised customer satisfaction and increased average spending. In addition to its growth, McDonald’s also offers financial benefits such as an industry-leading profit margin and strong cash flow. The company recently increased its dividend by 10%, marking the 47th consecutive annual dividend increase.
Procter & Gamble, on the other hand, has an even longer dividend streak than McDonald’s. The company’s focus on consumer essentials has allowed it to remain resilient even during recessions. Products like paper towels, laundry detergent, and baby care products are essential items that consumers typically continue to purchase regardless of economic conditions. In fact, P&G dominates these categories, accounting for more than 40% of global sales in some cases. This stability has allowed P&G to pay a dividend every year since 1890 and increase its annual payout for the last 67 years. Despite being considered a defensive stock, P&G experienced a strong 7% sales growth last quarter and management has raised their forecast as a result.
While P&G may face some challenges in the coming quarters, such as slowing inflation, the company’s sales volume metric will be key to monitor for signs of success. Although it declined by 1% last quarter, a return to positive territory is necessary for sustained growth. In the meantime, income investors can choose to reinvest P&G’s quarterly dividend, which can amplify their returns over time. By consistently reinvesting, investors can hold onto stocks for longer periods, accumulating more shares during market downturns. This strategy can potentially turn regular market fluctuations into opportunities for long-term returns.
