Great businesses can allow you to compound your wealth over the decades.
There are a great number of businesses that come and go over the years. As investors, we should continuously search for businesses that have staying power, as this allows them to thrive over the long term. Such great businesses offer a good mix of growth and dividends over the years to help you to compound your wealth, paving the way for a comfortable and secure retirement.
The key characteristics of companies that can stand the test of time include a long runway for growth, a dominant market position, and a large and untapped addressable market. Although such companies are often not cheap when assessed using normal valuation metrics, their consistency and stability assure investors that they need not lose sleep over their portfolios.
Here are three great stocks that you can buy and hold for decades.
Amazon.com (NASDAQ:AMZN) is one of the largest e-commerce and technology companies in the world. The Seattle-based company started in 1994 and, under the leadership of CEO Jeff Bezos, has grown into a behemoth over the last two and a half decades. Amazon clocked up net sales of $75.5 billion during the previous quarter, up 26.6% year over year, while generating trailing twelve-month free cash flow of $24.3 billion.
Amazon’s dominance should allow it to continue to grow over the long term, as more countries industrialize and more consumers switch to e-commerce. With the COVID-19 pandemic, the shift to online shopping has accelerated at an even faster pace. The company has even been hiring during the pandemic, with tens of thousands of openings even as jobs are being lost at a record pace in the U.S.
Amazon has also committed to spending a whopping $4 billion on COVID-related expenses to stock up on personal protective equipment for its employees and conduct enhanced cleaning of its premises. This initiative is admirable as it shows how the company prioritises the safety of its employees and is intent on ensuring that its business is not adversely affected by the ongoing pandemic.
Visa (NYSE:V) is a global payments giant that has demonstrated consistent growth since its IPO in 2008. For the second quarter of the fiscal year 2020, Visa handled a total of $2.1 trillion worth of payments, growing 3% year over year. Though payments volume suffered during the quarter (especially in March when the pandemic worsened considerably around the world), net revenues still grew 7% year over year during the quarter, while net income grew 4% year over year.
The growing trend toward cashless payments is a long-term tailwind for Visa, even though a sharp short-term drop in spending will negatively affect revenue and net income. As more people around the world are connected to the internet through their mobile devices and laptops, the demand for payments using debit and credit cards will also increase.
In January this year, Visa signed an agreement to acquire Plaid for $4.9 billion in cash, a network that makes it easy for people to securely connect their financial accounts to the apps they use to manage their finances. The acquisition, along with others such as Verifi and Payworks made in 2019, adds to Visa’s growing capabilities and expands the company’s ecosystem of users. The company’s strengthening moat will ensure that it can continue to grow and capture more customers over the long term.
Crown Castle (NYSE:CCI) owns, operates, and leases communications infrastructure such as towers and fiber to wireless network customers. The company is structured as a real estate investment trust (REIT), mandating it to pay out at least 90% of its annual taxable income to enjoy tax benefits.
From 2015 to 2019, Crown Castle’s annual dividend payments increased at a rate of about 8.1% per year from $3.35 to $4.58 per share. This consistent growth in payments underscores the strength and resilience of the company’s business model. Crown Castle’s leases are structured favorably, with long-term contracts for towers that have initial terms ranging from five to 15 years, along with multiple renewal periods of five to ten years. This structure ensures regular and predictable cash flows from its tenants, allowing the REIT to pay out consistent dividends.
5G infrastructure and technology represent a strong tailwind for the company. CEO Jay Brown mentioned in the company’s latest earnings that the wireless industry is entering another long investment cycle to deploy 5G technology. He believes that we are on the cusp of a new 5G wave that will persist over many more years to come. This trend will ensure Crown Castle’s business stays relevant and can continue to grow over the long term, and that investors can enjoy increased distributions as the deployment of 5G takes root.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Yang has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Crown Castle International, and Visa and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.