As the director of income research for
, I'm responsible for providing winning income ideas to more than
30,000 readers each month. You can guess that I'm always peppered
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 own forever.
In my mind, these "hold forever" gems are the safe, reliable
securities that increase dividends year after year. The securities
you want hold forever should come courtesy of businesses so
fundamental that demand never falters. For income stocks, this kind
of unwavering demand drives reliabledividend 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:
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 consistentdividend growth.
Sincegoing public about seven years ago, StoneMor has increased
dividends 10 times. The latest increase came just last month.
StoneMor now pays $2.34 per share annually and yields a generous
9.8% at today's share price.
But along with steady growth, a "hold forever" gem must also have
safe dividends. This means dividends are comfortably covered bycash
flow . In April 2011, StoneMor increased its distribution to $0.585
a share for the first quarter. Still, distributablecash flow of
$14.0 million easily covered the $9.3 million in distributions paid
during the quarter.
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 (NYSE:
. Senior Housing Properties owns independent and assisted-living
facilities that cater to seniors. It owns more than 300 housing
sites across the country.
Senior Housing began paying dividends in 2000 and has raised them
steadily since then, a few pennies at a time. There has never been
cut, even during the recent
. The company hiked dividends twice in 2007, once in 2009, and
again in 2010. Today, Senior Housing's yield is approaching 6.5%.
Distributions are safe because Senior Housing easily covers
payments from its
funds from operations (FFO)
. In the first quarter of 2011, the company reported $62.1 million
, paying out $52.5 million to investors. Moreover, reliable
is ensured by long-term leases on properties and growth comes from
built-in rent increases.
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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 more than 50% of its
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.
Keep in mind that 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 you started on the right track, we've created
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-- Carla Pasternak
Disclosure: Neither Carla Pasternak nor StreetAuthority, LLC
hold positions in any securities mentioned in this article.
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