Investing in a company to hold it forever is a simple idea, but it's not easy. Most companies can't maintain competitive advantages forever. Eventually, most businesses succumb to existential threats, such as competition or innovative disruption. Sometimes, entire industries go extinct, as do the companies in them.
So, what do buy-and-hold forever stocks look like?
For starters, they must operate in an industry that's unlikely to disappear. Healthcare is a great example.
Next, you want to invest in companies that have proven they can stay relevant. Paying dividends is pretty solid evidence of sustained relevance. Or, more specifically, paying dividends that go up year after year. Since dividends are cash payments from a company's profits to investors, the business must keep growing to afford them.
Now, it's time to put this framework into action. Here are three healthcare stocks poised to put passive income in your pocket for decades. Consider buying them now.
1. Abbvie: The pharmaceutical company long-term investors can depend on
AbbVie (NYSE: ABBV) is a pharmaceutical company and Dividend King with over five decades of continuous dividend growth, dating back to its years as a part of Abbott Laboratories. Pharmaceutical companies can be risky due to the boom-or-bust nature of developing heavily regulated drugs. AbbVie recently had a high-profile failure on a schizophrenia drug it acquired when it bought Cerevel Therapeutics for $8.7 billion. Its top-selling drug, Humira, came off patent last year. Setbacks like these are par for the course in the industry.
Yet, AbbVie has overcome these obstacles with a diverse product portfolio and pipeline. Despite these setbacks, analysts still estimate that AbbVie will grow earnings by an average of 8% annually over the long term. That's plenty of growth to keep raising the dividend. The company has raised its dividend by an impressive average of 14% annually over the past decade, and the dividend payout ratio is still very manageable at 57% of AbbVie's 2024 earnings estimates.
Investors may not find a more battle-tested pharmaceutical stock than AbbVie, and the company continues to succeed. That's a stock investors can count on for the long run, making AbbVie the rare pharmaceutical stock one should consider buying and holding forever.
2. Stryker: This company's innovation drives the healthcare industry forward
Stryker (NYSE: SYK) is a medical technologies company. Stryker is a global business that sells various equipment and products, from hospital beds to joint replacement implants. Innovation is its business model, and its products help raise healthcare quality standards worldwide. Stryker has nearly 13,000 global patents that help protect it from competitors replicating its products.
Such a diverse product portfolio translates to a stable business model. How dependable is Stryker? Going back to 1984, the company's annual sales haven't dipped by more than 6%! Naturally, that makes Stryker an outstanding dividend stock, too. The company has paid and raised its dividend for 31 consecutive years, and that's probably not stopping anytime soon.
Stryker's dividend payout ratio is only 26% of its 2024 earnings estimates. Meanwhile, management has raised the dividend at a brisk clip, averaging 10% annually over the past decade. This innovative company dabbles in so many areas of healthcare that it's a no-brainer for investors looking for passive income they can count on indefinitely.
3. Cardinal Health: A behind-the-scenes behemoth in healthcare
Cardinal Health (NYSE: CAH) plays a crucial role in healthcare, yet you've probably never heard of the company. Cardinal Health manufactures and distributes medical, pharmaceutical, and laboratory products and provides technology services to care providers and hospitals. You could think of Cardinal Health as a key cog in a highly complex industry's supply chain. The company keeps thousands of hospitals and care facilities stocked and running smoothly so they can focus on caring for patients.
As you can imagine, patients never stop needing care, so Cardinal Health's business is almost always booming. That's helped the company pay and raise its dividend for 29 consecutive years (and counting). Cardinal Health's dividend is currently just over 25% of its estimated 2024 earnings, so there's no financial strain to continue paying and raising it in the future.
Cardinal Health operates in over 30 countries. Its global footprint makes it an excellent long-term investment, given the growing world population and the likelihood that healthcare quality will improve across emerging markets as those countries' economies mature. That should mean decades of steadily rising dividends ahead.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $348,112!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $46,992!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $495,539!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of December 9, 2024
Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Abbott Laboratories. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
