The numbers have grown so large over the years, it's hard for me
to believe sometimes.
In total, more than 250,000 subscribers receive my free
newsletter each week. I'm also the Director of Income Research for
, which boasts more than 30,000 readers. With nearly 300,000
investors reading my analysis, you can guess that I am always
peppered with questions.
But one question is asked more than any other: "What should I buy?"
It can be a tough one to answer. After all, everyone has different
goals for their portfolio. Some want the safest dividends possible.
Others want the highest yields they can find. Still others are
looking for a combination of growth and yield.
So when I answer, I make it simple on myself. I tell people to buy
income stocks they'll want to
In my mind, these "hold forever" gems are the safe, reliable
securities that increase dividends year after year. The securities
you hold forever should come courtesy of businesses so fundamental
that demand never falters. For income stocks, this kind of
unwavering demand drives reliable
growth. Year in and year out, regardless of circumstance, these
stocks can power -- and even raise -- dividends.
This sort of steady demand isn't a fairy tale. For example,
StoneMor Partners LP (Nasdaq: STON)
is the nation's second-largest owner/operator of cemeteries. It
operates more than 250 cemeteries and 60-plus funeral homes across
the United States. The company takes one of life's certainties and
channels it into consistent dividend growth.
six years ago, StoneMor has increased dividends eight times. The
latest increase came just last month. StoneMor now pays $2.26 per
share annually and generously yields about 8.0% based on recent
But along with steady growth, a "hold forever" gem must also have
safe dividends. That means dividends are comfortably covered by
. Last year StoneMor produced $35 million in distributable cash
flow, but paid only $27 million in dividends. That leaves plenty of
room for future dividend hikes.
Truth be told, the graying of our population is a great place to
look for long-term holdings. It's one trend that shows no sign of
reversing for decades.
That's why I am also a fan of
Senior Housing Properties Trust (
. Senior Housing Properties owns independent and assisted-living
facilities that cater to seniors. It owns roughly 300 housing sites
across the country.
Senior Housing began paying dividends in 2000 and has raised
payments steadily since then, a few pennies at a time. There has
never been a dividend cut, even during the recent recession. The
dividend hiked twice in 2007, again in 2009, and again last month
to a $1.48 per unit annualized rate. At this new rate, Senior
Housing yields a steady 6.0%.
Distributions are safe since Senior Housing easily covers payments
funds from operations (FFO)
. The company produces roughly $53.5 million in
each quarter, which covers $45.9 million paid out as distributions.
Moreover, reliable cash flow is ensured by long-term leases on
properties, and growth comes from built-in rent increases.
Action to Take -->
Either StoneMor or Senior Housing would qualify as "hold forever"
income stocks. And even though they're just examples to show what
I'm talking about, you may want to consider them for your own
Of course, there is no such thing as a perfect investment. Even
with long-term holdings, you have to be willing to overlook a few
blemishes. For instance, Senior Housing Properties relies on one
tenant -- Five Star Quality Care -- for nearly 60% of its income.
At this point, however, I think the benefits of steady demand and
reliable dividends outweigh the risks, and it should be that way
for a long time.
: An amazing thing happens when you hold income stocks forever --
the dividends add so much to your total return that it becomes hard
to own a losing position. This is something
many of the world's most successful investors
found out long ago. To get
started on the right track, we've created a short memo on the
subject to supplement this article.
Click here to start reading
-- Carla Pasternak
Carla Pasternak has nearly 30 years of income investing
experience, including serving as the Director of Research for
High-Yield Investing and High-Yield International. Read More...
P.S. Investing in dividend-paying stocks is one of the most
profitable ways to beat the market. For more on stable stocks that
will grow your money with ever-increasing dividends, see Carla
Pasternak's latest course, The 5 Rules Every Income Investor Has to
Disclosure: Neither Carla Pasternak nor StreetAuthority, LLC
hold positions in any securities mentioned in this article.
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