2 FTSE 100 stocks I’d buy and hold for decades

I like one FTSE 100 dividend hero stock for its passive income potential and another for its growth stock credentials as long-term buys for my poprtfolio.

| 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.

There are two types of FTSE 100 companies in particular whose stocks I am happy to buy and hold for decades. First, I like the look of a dividend hero stock. Reinvesting dividends to build up the number of shares I own, which can eventually start paying me a passive income, forms a key part of my retirement planning. Second, I would be happy buying and holding a FTSE 100-listed company that invests in a portfolio of exciting high-growth stocks for decades. A portfolio of stocks can change over time and is unlikely to fail because of one bad bet. Because of this, I can be confident the company will still be around for years to come.

A passive income stock

Stocks that pay reliable dividends are prime candidates to buy and hold for decades. A steady flow of dividends can be used to buy more shares. When its time to retire, there should be a stream of passive income to enjoy, or the shares can be sold. For this plan to work, I look to buy dividend hero stocks.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Consumer goods giant Unilever (LSE: ULVR) has not cut its dividend in nearly four decades. Unilever has historically made a little over 1.5 times as much in earnings as it pays out in dividends. Being able to cover dividends with earnings comfortably is a hallmark of a dividend hero stock, and forecasts for the next couple of years suggests the Unilever will continue to be a dividend hero.

Unilever has recently won shareholder approval to simplify its corporate structure. This should make acquisitions easier, which is good because Unilever historically achieves a high rate of return on invested capital. Margins have been improving, and the company’s e-commerce strategy paid off handsomely as countries went into lockdown. I am happy buying Unilever and holding it for decades. The dividend yield is around 3% now but given Unilver’s history and ambitions, I except sustainable dividend growth from this FTSE 100 stock.

FTSE 100 growth

I have often lamented the lack of FTSE 100 stocks among the headline-making high-growth tech companies. However, Scottish Mortgage Investment Trust (LSE: SMT) provides the kind of exposure I have been craving. The name of this FTSE 100 stock is somewhat misleading. What the mangers at Scottish Mortgage do is invest in a portfolio of around 90 stocks that they feel have competitive advantages in the new economy.

Large and listed companies like Amazon (e-commerce), Tesla (electric vehicles), and ASML (computer chips) feature in Scottish Mortgage’s top 10 holdings. Investing in a high-growth portfolio has done wonders for Scottish Mortgage’s share price. Over the last five years, it has risen by an average of 30% per year, comfortably beating the FTSE 100. That kind of return would have transformed a £1,000 investment into over £4,000.

Scottish Mortgage takes a long-term approach to its stock picks. Some are in smaller and unlisted companies that may take years to pay-off. Some will, of course, fail. Right now, some tech stocks look pricey and could fall. All this points to a lot of potential volatility in Scottish Mortage’s stock price. But that’s fine with me, as I am happy to buy these shares, hold them for decades, and ignore any short-term price swings. 

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How I’d apply the Warren Buffett method to buying shares

Learning from billionaire investor Warren Buffett, our writer explains his own approach to investing in shares for his portfolio.

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

This dividend share yields under 1% — but I’d still buy it

This dividend share has a low yield. So why would our writer consider adding it to his income portfolio?

Read more »

Young lady working from home office during coronavirus pandemic.
Investing Articles

Looking for a good share to buy? Here’s how I do it

Here are two approaches our writer uses when hunting for a good share to buy for his portfolio to aim…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

One cheap FTSE 100 share I’d buy for a new bull market

This FTSE 100 share is unloved and starting to look seriously cheap, says Roland Head.

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

How I’d invest £500 in UK shares in 2022

Investing a small amount of capital in UK shares can result in high commission costs. Zaven Boyrazian explains how to…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

2 battered FTSE dividend stocks to buy in July!

I'm still searching the FTSE 100 for the best bargains to buy. I think these two big dividend shares are…

Read more »

Woman pulling baffled face
Investing Articles

Can I trust Lloyds’ 6.1% dividend yield?

The Lloyds' share price has sunk in 2022, causing the bank's dividend yield to leap. But can I really trust…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

3 top stocks to buy before the market rebounds

Edward Sheldon highlights three beaten-up stocks he'd buy before global stock markets stage a recovery from their 2022 declines.

Read more »