Stock investors in the U.S. have much to be optimistic about in December.
U.S. consumer confidence is the highest since 2000. New home sales are the strongest in a decade. And the S&P 500 (.SPX) is comfortably above 2,600 and continues to set new record highs on a regular basis.
Still, it's safe to say that the investments that worked for investors over the last 12 months may not succeed in 2018. In fact, mutual-fund giant The Vanguard Group recently warned that the chance of a correction next year is now 70%. And as such, many traders are looking to protect their profits and rebalance their portfolios as we enter 2018.
That’s probably wise. However, it's equally important to remember that profitable investing is about success in the long-term — not just the next few months. Plenty of traders have seen quick gains go up in smoke, while enduring investors who kept their cool ultimately came out ahead.
So instead of thinking about stocks to buy for the next year, consider stocks you can comfortably own for the next decade. That's what I'm doing, and here are five long-term dividend plays at the top of my list:
1. Cisco Systems
- Dividend yield: 3.1%
- Market Cap: $182 billion
- Sector: Technology
When investors look for reliable dividend stocks, often they overlook the tech sector. That's in part because even tech companies like Apple (AAPL) that pay some kind of dividend still offer less than 10-year Treasurys — or on the flip side, because many tech stocks that do yield a decent amount don't have much to offer investors beyond their dividends.
But Cisco Systems (CSCO) stands apart. Not only does the IT giant currently offer an attractive dividend, with payouts that have jumped from 6 cents a quarter in 2011 to 29 cents a quarter at present, it also has a good growth story to tell after its recent impressive earnings report. Not only did the company beat on earnings and boost its outlook, it showed Wall Street that it is effectively transitioning from networking hardware into cloud-based solutions that are the norm nowadays. Cisco shares are up about 20% in the last three months as a result.
Cisco’s structural improvements bode well for the next several years. And given Cisco's commitment to increased dividends and deep pockets, with some $72 billion in cash and investments in the bank, you can be certain this company will keep rewarding shareholders for the next decade to come.
2. Ladder Capital
- Dividend yield: 8.7%
- Market Cap: $2 billion
- Sector: REITs
Ladder Capital Corp. (LADR) is an intriguing play on a broad uptrend in the U.S. economy. It's a REIT, but unlike other companies in this sector it doesn't actually own properties. Instead, it provides commercial mortgages and other financing to third parties.
Right now, the firm's portfolio includes financing for high-rise office buildings in New York City, a residential development in suburban Minneapolis, and a mixed-use property in Los Angeles. If you want to profit from a generally rising U.S. economy, this is a great option, and since Ladder Capital is a REIT, it must deliver 90% of its taxable income back to shareholders via dividends, which in this case are tremendous.
Admittedly, Ladder Capital has only been on public markets since 2014 and had an extremely rough 2014 after the initial glow faded. But this REIT is now in a groove, with sustainable payouts and a bright future as rents for commercial and residential properties both look to move briskly higher in a pro-growth environment.
And even if shares flatline for the next 10 years and distributions don't budge, that big-time yield alone is worth the price of admission.
- Dividend yield: 5.2%
- Market Cap: $25 billion
- Sector: REITs
A very different kind of REIT is Welltower Inc. (HCN), a healthcare-focused real estate investment trust that invests primarily in senior housing, hospitals, and medical office buildings.
For starters, the recession-proof nature of healthcare makes it an important part of any portfolio. Consumers will always go to the doctor if they're sick or the emergency room after an accident, regardless of economic conditions. Furthermore, the demographic shift in America, driven by Baby Boomers who need more care as they age, ensures a nice tailwind for years to come specifically for senior housing and assisted living.
8 bear-resistant dividend stocks
Welltower (formerly known as Health Care REIT Inc.) has been a bit volatile in the last two years, thanks in part to uncertainty surrounding healthcare reform, but the second failure of an attempted Obamacare repeal has given stability to Welltower stock and its peers. Welltower in particular has a great balance sheet compared to some other highly leveraged REITs, with both a manageable debt load and an attractive maturity profile that shows no major debt coming due until 2021.
There is a lot of uncertainty when you're holding stocks for many years, but the stability of healthcare spending is as close to a slam-dunk investment as you'll find. This well-run healthcare REIT is a great way to capitalize on that.
4. Dominion Energy
- Dividend yield: 3.8%
- Market Cap: $53 billion
- Sector: Utilities
Dominion Energy (D) is a safe play for many reasons, but mainly because this a low-risk utility stock with reliable operations, and yields almost twice that of the typical S&P 500 stock. Dominion generates electricity primarily in the mid-Atlantic region of the U.S. from North Carolina to Pennsylvania and distributes natural gas broadly across the Western U.S. The consistent cash flow from these operations has fueled consistent dividend payouts for almost 90 years, and has allowed Dominion to grow payouts substantially over time; distributions were 39.5 cents per quarter at the end of 2008 and are now 77 cents, an increase of about 95% in just nine years.
Moreover, Dominion is one of the most adaptable and diversified utilities in the U.S., with numerous nuclear- and renewable power generation facilities in its portfolio. This isn't just good as a hedge against the long-term decline of fossil fuels, but is also a bridge to new business. One recent headline that should pique investor interest is a recent contract to provide renewable energy to a Facebook (FB) data center in Virginia. That kind of willingness to meet big corporations where they live is a strong sign that Dominion is forward-thinking.
5. Procter & Gamble
- Dividend yield: 3.1%
- Market Cap: $225 billion
- Sector: Consumer staples
While Procter & Gamble (PG) may not be the sexiest company on Wall Street, there's a reason this consumer-staples giant continues to be a mainstay of dividend investors year after year.
P&G is as stable a corporation as they come, with a wide product portfolio that includes big brands, such as Tide laundry detergent, Pampers diapers, and Charmin toilet paper. The company also has a consistent commitment to dividends, increasing its payout for the past 60 straight years, and has been generous with those increases; distributions have roughly doubled in the past decade, putting P&G dividend hikes in the ballpark of 10% each year.
While the shares have been range-bound for a few years, a recent proxy fight with activist investor Nelson Peltz has shaken the company awake. And even if the tally in the voting has been disputed by P&G, the message from its investors is crystal clear: pay more attention to the bottom-line and to delivering real shareholder value. That should usher in some important changes that help this stock remain dominant for the decade to come.
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