2 dividend stocks I’d buy and hold for the next 10 years

These two buy-and-hold shares may be worth hanging onto for the long haul.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today, I’m looking at two dividend stocks to buy and hold for the long haul.

Severn Trent

When you’re looking for stocks to keep for the next 10 years, the business would have to possess a robust track record of returning value to shareholders, have a resilient business model and offer a long-term growth story.

With these three criteria, Severn Trent (LSE: SVT) comes to my mind. As a regulated water utility company with a monopoly over its customers, it generates stable earnings that grow steadily with inflation. This enables the firm to pay growing dividends to shareholders year after year, which makes its shares so attractive for investors looking for an inflation-beating income.

Regulatory risk

On the downside, investors need be wary of regulatory risk. Every five years, Ofwat, the water regulator, reviews and decides how much water companies need to invest in their infrastructure, and the level of customers’ bills needed to achieve this.

In a draft methodology paper published earlier this month, the next industry price review (PR19) looks set to be tougher than before. Ofwat is expecting to see significant improvement in affordability, customer service and innovation.

However, Severn Trent is also encouraged by the proposed changes to how good performing companies will be rewarded, as Ofwat is set to sharpen incentives for innovation by uncapping customer Outcome Delivery Incentive (ODI) rewards and increasing the role of cost sharing.

The firm has embraced the ODI regime, and is well placed to benefit from the changes as its comparative performance in the first two years of the current regulatory period has been encouraging. Its performance on water quality compliance and customer service is one of the highest in the industry, and as such, it expects to be well rewarded.

Near-term

In today’s trading update, the company upgraded guidance on its business services unit, and said it now expects both revenue and profit before interest and tax in this segment to grow on a like-for-like basis. In addition, the board continues to expect the company to deliver full-year trading performance in line with expectations and its prior guidance.

With shares currently trading at 18.4 times forward earnings and a prospective yield of 3.9% this year, Severn Trent seems to me reasonably valued.

Assura

Looking elsewhere, I reckon that healthcare property-rental company Assura (LSE: AGR) is another great long-term income play. The REIT is the largest primary care property investor and developer in the UK, with 422 medical centres and a total annualised rent roll of £76.9m.

While the healthcare property sector is not immune to macroeconomic risks, the sector is somewhat shielded by a chronic shortage of suitable properties and the non-cyclical nature of demand for healthcare. What’s more, Assura benefits from long lease terms, with an average unexpired lease term of 13.1 years, and inflation-linked leases, which offer it significant protection against a potential downturn.

In Tuesday’s trading update, the company announced that it had achieved a weighted average annual rent increase of 2.07% from 36 reviews settled in the three months to 30 June 2017. Looking ahead, it is set to grow its portfolio with £146m worth of new rental assets coming from acquisitions and new developments.

Shares in Assura currently trade at a 25% premium to its NAV, with a trailing yield of 3.7%.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »