While Warren Buffett is arguably the most famous investor in the US, in the UK that title probably belongs to Neil Woodford. Both investors have delivered excellent returns over a long period. In Neil Woodford’s case, he has focused on high dividend paying stocks in tobacco and healthcare, while also investing for the long term. Here’s why that strategy has made him a successful investor.

Long term

For any investment to come good, it takes time. Although communications are faster today than they were in previous years, and buying and selling shares can be done within seconds, the reality is that the business world moves at a much slower pace. New ideas and new strategies take time to be decided upon by senior management and then take even more time to filter through the company and have an impact on sales and profitability.

Investors such as Neil Woodford therefore invest for multi-year periods. This means that a company which is perceived as good value for money has time to gradually come good, whether that be because of increasing investor interest or improved financial performance. Investing for the long term also keeps trading costs down, which enhances total returns.

Dividend focus

Neil Woodford is known to favour companies that pay high dividends. This is another reason why he has been successful. Various studies have shown that the majority of investment returns over a long period come from dividends rather than from capital gains. This means that income returns are worth taking very seriously.

As well as providing an income return, dividends also provide guidance as to the financial health of a company. If that company is performing well, and its management has confidence in its outlook, then it is reasonable to assume that dividends will be high. Similarly, a high dividend could mean that a company’s balance sheet and cash flow outlook is positive. This would indicate that the company’s risk profile is lower and may mean that its overall risk/return profile is more appealing.

Sector focus

Neil Woodford has favoured tobacco and healthcare stocks in his investment career. In an interview, he stated that he wished he’d bought even more of them, such has been their stunning returns over the years.

Looking ahead, those very same sectors have the scope to continue their excellent performance. In the case of healthcare, the world faces a rapidly rising population over the long term as well as the effects of an ageing population. This means that demand for healthcare products and services is likely to rise in future – possibly at a faster rate than it has done in the past. Similarly, a rising population means that even though consumers are becoming increasingly health conscious, the number of smokers across the world is likely to rise.

Tobacco and healthcare stocks therefore still have huge appeal. Alongside a focus on dividends and a long term view, investing in them has helped Neil Woodford to become one of the best known and most successful investors around.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.