Forever is a long time. But there are a handful of companies on the London market that I would be happy to buy today and hold forever.
Naturally I wouldn’t recommend building a portfolio made up of just three stocks. But if I did find myself owning just these three shares, I think I’d still be able to sleep comfortably at night.
98% of households use this
If you hunt through your kitchen and bathroom cupboards, you’ll probably see a fair number of well-known brands. But if you look closely, you’ll probably find they’re almost all made by a handful of big consumer goods companies.
One of the largest players in this sector is Unilever (LSE: ULVR). This 90-year old firm owns brands including Domestos, Dove, Knorr, Magnum, Persil, Sure, Ben & Jerry’s and many more.
The company reckons you’ll find at least one of its brands in 98% of UK households. Globally, 2bn people use Unilever products every day.
The firm’s products are relatively commonplace, but its market-leading brands provide stable demand and good pricing power. The result is a business that generated an operating profit margin of nearly 25% last year.
Unilever stock isn’t the cheapest. But the group’s dividend has grown from 6.9p per share in 1988 to around 142p per share today. That’s an increase of 1,955%.
Today the shares offer a forecast yield of 3.5%. I expect this payout to continue rising and believe Unilever remains a great buy-and-hold stock.
Invest with the family
Family-controlled businesses can often be good investments, as they tend to benefit from a long-term approach. City asset manager Schroders (LSE: SDR) certainly fits this description, in my view.
The founding Schroder family still own 47% of this business, which is now 215 years old and managed £444bn of assets at the end of June 2019. The group has a focus on sustainable returns and says that over the last five years, 72% of its assets have outperformed the wider market.
Schroders’ longevity gives me confidence that this company is still likely to be trading well in another 100 years. Unusually, Schroders has two classes of stock. By buying the non-voting Schroders (LSE: SDRC) shares, private investors can get a dividend yield of 4.6%, versus 3.6% for the SDR voting shares. Given the Schroder family’s large stake in the business, I wouldn’t bother voting — I’d rather have the extra yield.
Neatly packaged
Love it or hate it, packaging is an essential part of modern supply chains. I can’t see this changing, but what I do think is that packaging will become more efficient and recyclable. One of my top picks in this sector is FTSE 100 group Mondi (LSE: MNDI), which sells more than £7bn of packaging to its clients each year.
The majority of this is cardboard and paper, which is highly recyclable, but Mondi does still have a plastics division.
Market conditions are said to be soft at the moment and the group’s underlying cash profits fell by 18% to €383m during the third quarter of 2019. But the shares have already fallen significantly and the business looks decent value to me at current levels.
Shareholders can pick up the stock on 12 times 2020 earnings, with a dividend yield of nearly 4%. I rate Mondi as a long-term buy at this level.
