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3 Stocks That Could Create Lasting Generational Wealth
Generational wealth is more about consistency than getting rich. Remember, getting money isn't the same as keeping it. So, when you invest for decades into the future, high-quality companies with extremely durable business models and growth opportunities are essential.
That's where blue chip dividend stocks come in. These companies are proven winners that may not have explosive growth or grab the headlines. However, their steady performance and growing dividends have made shareholders remarkably wealthy over generations.
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Consider buying these three consumer-facing winners and holding them for years to come.
1. McDonald's
From a revolutionary restaurant in the 1940s to the world's largest fast-food chain today, McDonald's Corporation (NYSE: MCD) is a staple of American culture. The company has over 41,000 locations worldwide, with plans to expand to 50,000 over the next few years. The beauty of the McDonald's business is that it's primarily a franchise model. McDonald's sells its brand and intellectual property to restaurant operators for a franchise fee and royalties on sales. It will sometimes purchase the land the restaurant is on, thereby earning rental income, too.
The franchise model has lightened the company's financial needs (restaurant operators fund the equipment and overhead), making McDonald's an excellent dividend stock. The company has increased its dividend annually for 49 consecutive years, making it a future Dividend King. Below, you can see how decades of expansion and rising dividends have generated life-changing long-term results. Remember, profits must grow to fund a larger dividend, so it's a sign of a successful business if it can keep paying shareholders more money. McDonald's dividend is still only 60% of its earnings.
MCD Total Return Price data by YCharts.
The company can innovate and alter its product to suit consumer tastes, and the Golden Arches are a legendary brand, so it's hard to see this company going anywhere. As long as people enjoy quick and low-priced food, McDonald's is bound to thrive. That makes it a no-brainer for any long-term portfolio.
2. PepsiCo
Most people know PepsiCo (NASDAQ: PEP) for its name-brand soda flavor, but don't appreciate its extensive product portfolio. The company owns a sprawling collection of beverage and snack brands, including Mountain Dew, Sierra Mist, Crush, Brisk, Lay's, Doritos, Quaker, Ruffles, Tostitos, Gatorade, and many more. In other words, most people buy PepsiCo products on each trip to their local grocery store.
Food and beverages are essential products, virtually immune to technological disruption. If there's a hot, new food or beverage brand out there, PepsiCo has the deep pockets to buy it. The company recently added Siete Foods to its product family. Therefore, PepsiCo has continually grown, raised its dividend, and generated staggering lifetime returns for shareholders.
PEP Total Return Price data by YCharts.
There isn't much stopping PepsiCo from continuing to chug along over the long term. The company's diverse products and global market presence position it to benefit from big-picture trends, like population growth and middle-class expansion in emerging markets. The dividend yields over 3% today and has enjoyed 52 consecutive annual raises. The manageable 66% dividend payout ratio almost ensures the dividend will keep marching higher over time, so stash some shares in your portfolio and enjoy the slow and steady ride.
3. Procter & Gamble
Many people buy consumer staples like toilet paper, toothpaste, soap, and diapers out of habit. If you run out of deodorant, you'll probably grab a stick or two of your usual brand the next time you're at the store. These routine purchases help explain the prolonged success Procter & Gamble (NYSE: PG) has enjoyed for over a century. The conglomerate owns dozens of leading household product brands, including Crest, Tide, Pampers, Bounty, Charmin, Tampax, Old Spice, Gillette, and many more. These products are another example of things people use daily, and they're unlikely to face technological disruption.
Although the products themselves may evolve, people will probably still use shampoo and deodorant a century from now. Procter & Gamble's brand power helps it continue to sell products despite competition from cheaper generic knock-offs. Procter & Gamble is also a global company, so the combination of pricing power and population growth has driven fantastic long-term investment returns.
PG Total Return Price data by YCharts.
Procter & Gamble is a legendary dividend stock, a Dividend King with 68 consecutive annual increases. There's no faking generations of dividend growth. However, the company's dividend is only 58% of its estimated 2024 earnings, so expect plenty of future raises. Like PepsiCo, Procter & Gamble should grow as middle classes emerge in countries worldwide. It is a timeless business, perfect for investors who want to buy shares, hold them, and occasionally check in on things. Just make sure you're reinvesting those dividends.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $348,216!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $47,425!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $480,681!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of December 30, 2024
Justin Pope has positions in PepsiCo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
