A core principle of sensible share investing is that we should seek to hold the shares that we buy for a reasonable number of years. Conventional wisdom puts that number at around five to 10 years.
Even the best of us can horribly misjudge what we see as a stock’s likely profit performance compared with how they really perform over such a period, however. So surely predicting how a company will perform over a much longer period — say, half a century — is a nigh-on impossible task, right?
Well, yes and no. As we know, past performance is not an indicator of how a business will perform in the future. But in many cases, it can provide a pretty decent guide.
A Victorian powerhouse
Take Britvic (LSE: BVIC), for example. The soft drinks business, which dates all the way back to 1845, became a household name when it introduced its first line of own-brand mixers in the early 1970s.
It went one step further with the acquisition of much-loved labels like Tango and R Whites in the 1980s and then Robinsons in the following decade. Subsequent bottling agreements signed with global Goliaths like Pepsi and 7Up saw even more of its products springing up in cupboards the length and breadth of Britain.
The FTSE 250 firm’s appetite for picking up thriving labels and enhancing them continues to this day, albeit in places that are a little further afield, and in 2011 and 2015 it picked up Fruité Entreprises of France and Brazil’s Ebba respectively. The latter deal in particular provides plenty of cause for optimism as colossal population growth and increasing personal wealth levels will drive soft drinks demand in the years ahead.
Another reason why I think the beverages behemoth will remain a winner for decades to come is its record of innovation. From creating a catalogue of vitamin-infused drinks back in the 1930s to help keep Britons healthy, its position at the coalface of drinks formulation is showing no signs of fading, and this is perfectly illustrated by its ability to circumnavigate the sugar levy in the UK over the past year or so and keep its much-loved brands in high demand.
Profits + dividend growth
Of course, no business is immune to disappointing earnings performances and even annual reversals now and again. What sets Britvic aside, though, is that the evergreen popularity of its product labels leaves it better equipped to ride out tough trading conditions better than most and to deliver strong earnings creation over the longer term.
Latest financials underlined these defensive qualities perfectly, Britvic last week advised that revenues rose 5.1% to £1.5bn in the 12 months to September, despite tough overseas markets and a carbon dioxide shortage which hampered production in its core UK territory. Pre-tax profit thus rose 5% for the year to £145.8m.
And City analysts are predicting a 3% earnings rise for the current fiscal year, leaving it dealing on a cheap forward P/E ratio of 14.8 times. This positive prediction also means that Britvic’s long-running progressive dividend policy is expected to remain alive. Last year’s 28.2p per share reward is predicted to rise to 28.9p in fiscal 2019, meaning investors can enjoy an inflation-beating 3.4% yield.
If you’re looking for a share to buy today and calmly hold for decades to come, you can’t go wrong with Britvic in my opinion.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. 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.