I always find it interesting when authors post about dividend stocks that can be held for life. How is it possible to know what a company will look like 20, 30, or even 50 years from now? It blows my mind. I understand the fact that it makes an attractive headline that can bring in a lot of visitors. Who wouldn’t want to take a few minutes of research to find a stock that can be held for several decades?
Don’t get me wrong, I would love to be able to determine a stock that should be owned for the next 50 years. I would also love to have money growing on trees but that doesn’t necessarily happen. Buying stocks like Coca-Cola (KO), Proctor & Gamble (PG) and ,any of the dividend aristocrats would surely have been a winning strategy, no doubt about that. It is much easier to take out such examples after the fact however.
I’m not saying that long term investing can’t work, far from it. I strongly believe in long term investing and have been working on my dividend sustainability set of criteria. These are all built with one clear objective: Finding long term value stocks is not that difficult and we do a lot of such research both on the blog and in our newsletter. Would I consider those stocks good for my entire life? No. However, they hopefully will turn out to be just that. Stocks that have strong balance sheets, strong brands, that are able to increase sales, earnings and dividends every year and should be able to do so in the short to medium term are stocks that will hopefully be great dividend plays for decades to come.
Is it possible that the difference between what these authors describe as “life long dividend stocks” and what I understand is simply in the meaning? Very much so. To me, saying that you are buying a stock for life means that you do not need to look back on the purchase and re-evaluate the stock every year, that you are ready to go on “auto-pilot”. I very much think that every stock should be re-evaluated every year. Chances are that quality stocks will make the cut for several years. I would not just automatically assume that it will though.
Is it just me?