Buying and holding stocks is easier said than done. Ideally, you find a great company, buy the stock, and let it grow and pay you dividends forever. The problem is that few companies fit that bill. The world changes, and the competition is ruthless. A company must evolve and stay on top to justify owning the stock year in and year out.
Yet, there are some exceptions, and these are companies with wide moats and competitive advantages that have stood the test of time. If you want decades of passive income from steady dividend streams, listen up. Consider buying and holding these two stocks right now.
1. The battle-tested leader of big oil
ExxonMobil (NYSE: XOM) is an integrated oil major, a company that explores and drills for oil and gas, refines it, and sells it to the market. Participating in different parts of the oil and gas supply chain diversifies the company, helping it withstand fluctuations in commodity prices. For example, falling oil prices would hurt ExxonMobil's exploration business but boost profit margins in the refining business. In total, ExxonMobil generates over $340 billion in annual revenue.
The company boasts a sprawling portfolio of assets, including land and equipment, valued at nearly half a trillion dollars on its balance sheet. ExxonMobil has proven able to shuffle its assets, selling pieces to raise cash or acquiring new assets when an opportunity arises. It acquired Pioneer Energy for almost $60 billion earlier this year, which boosted ExxonMobil's footprint in resource-rich regions like the Permian Basin and Guyana.
ExxonMobil's management team has also managed the company's balance sheet well, which acts as a safety net when industry downturns hurt profits. The company has a stellar AA- credit rating from Standard & Poor's and a debt-to-equity ratio of just 0.16, its lowest in a decade.
If that's not enough to give you peace of mind, look at ExxonMobil's dividend history. Management has raised the dividend for 42 consecutive years, including during multiple recessions and a worldwide pandemic that essentially froze the global economy and even took oil prices below zero for the first time.
ExxonMobil is as battle-tested as it comes in the energy sector. Renewable energy and climate change could start to eat into demand for fossil fuels over the coming decades, but oil and gas aren't going away anytime soon. At the very least, ExxonMobil should have time to diversify its business or acquire smaller competitors as the industry consolidates.
The stock offers investors a solid 3% yield at its current share price, so investors can confidently buy ExxonMobil and collect the dividends for the foreseeable future.
2. An agricultural titan with top-notch brand power
Deere & Company (NYSE: DE) sells agricultural, forestry, and construction equipment worldwide. The company's iconic John Deere brand is famous for its trademark green paint, arguably among the world's most recognizable colors. Deere does more than sell equipment; it also makes money on financing, repair, and maintenance services.
In all, Deere generates over $54 billion in annual revenue. There is competition, but Deere's long history and recognizable brand have earned consistently strong loyalty among farmers.
The Earth is only so large, and the world's population continues to grow. According to the United Nations, the global population could increase from 8.2 billion to 9.7 billion by 2050. That means it will be crucial to farm as efficiently as possible and to get the most out of the land society has. Deere sells next-generation technology, such as autonomous equipment and cloud-based software, designed to help farmers become more efficient.
Farmers generally finance this expensive equipment, which adds some risk to Deere since it holds those loans. However, Deere comfortably maintains an investment-grade balance sheet with an A credit rating from Standard & Poor's. When it comes to the dividend, management doesn't always raise it. But make no mistake, Deere is a dividend growth stock. The dividend has grown 145% over the past decade.
Perhaps most importantly, Deere hasn't cut the dividend since the 1980s, so management has maintained it through multiple cycles in the agricultural industry. The dividend yields 1.4% today, which isn't a ton, but it is poised to grow over time. Analysts estimate Deere will grow earnings by an average of 12% annually over the next three to five years.
I wouldn't be surprised to see many more years of solid growth ahead in a world that will need more food and efficient farming. The dividends should follow.
Should you invest $1,000 in ExxonMobil right now?
Before you buy stock in ExxonMobil, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and ExxonMobil wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $831,707!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 14, 2024
Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Deere & Company and S&P Global. The Motley Fool has a disclosure policy.
Want Decades of Passive Income? 2 Stocks to Buy Right Now was originally published by The Motley Fool