Various studies have shown that dividends, when reinvested, play a significant role in overall investment returns. For this reason I have a watchlist of income shares. Here are three I’d consider buying now to hold for the next decade.
The steady share to power my portfolio
National Grid (LSE: NG) is a share I’ve held for a long time. I see little reason why I won’t continue to hold the shares for another decade. The dividend yield is 5.5%. I think, even in an unprecedented environment like the current one, the dividend is unlikely to be cut.
A halving of returns from Ofgem is far from ideal for the shares and I suspect that’s why they’ve fallen recently. Long-term though, I think the growth in the unregulated ‘Ventures’ part of the group, alongside growth in the US, means National Grid should do well.
A combination of a steady business, growth opportunities, a share price that isn’t volatile, and a dividend that should always be paid, combine to make me think National Grid is a great investment for the next decade.
The Covid-19 factor
AstraZeneca (LSE: AZN) is another share I hold. It’s also another share that should do well in all market conditions as there’ll always be demand for pharmaceuticals.
This is why I fully expect it to always provide dividend income. As the share price has done very well in recent years, and especially in the last few months, it’s not the highest yielding of shares. However, that’s fine if you’re looking for dividend growth, which is arguably more important than yield.
Involvement in finding a vaccine against Covid-19 has helped lift sentiment around AstraZeneca. This has boosted the share price, which was already rising due to a flurry of positive drug updates last year and this year. The shares are expensive, but I think they should do well over the next 10 years.
Room for improvement and dividend growth
GlaxoSmithKline (LSE: GSK) is another pharmaceutical business I’d add to my list of shares to hold for the long term. It’s a bit behind AstraZeneca in some ways, but that gives it more room for improvement. It has a higher yield, but the downside is that the dividend has been held up for a few years as the group focuses on R&D.
Assuming this R&D investment translates into potential big new treatments – as it has at AstraZeneca – then the next decade could be very good for the share price.
Just this week, it was announced that GSK is making a £130m investment into German group CureVac, which is also involved in finding a vaccine for Covid-19. The investment could help GSK defend its strength in the vaccine market where it’s a major player.
With that increased focus on R&D and more specifically, oncology, I think GSK could be on a path similar to AstraZeneca’s. It’s playing catch-up, but the share price could do well if the bets on drugs pay off.
With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…
As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.
With so many blue-chip and mid-cap companies scrambling to hoard cash right now, where are we income investors to turn for decent yields?
Fortunately, The Motley Fool is here to help…
Our analyst has unearthed what he believes could be a very attractive option for income- seeking investors – a company that, in his view, boasts a ‘reliably defensive’ business model, combined with a current forecast dividend yield of 4.2% to boot!*
But here’s the really exciting part…
This business even has form in riding out this kind of situation, too… having previously increased sales and profits back in 2008 and 2009 when the world was gripped in the deepest economic crisis since the Great Depression.
*Please be aware that dividends are variable and not guaranteed.
Andy Ross owns shares in National Grid and AstraZeneca. The Motley Fool UK has recommended GlaxoSmithKline. 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.