Is this stock market driving you up the wall? I’m going to describe what I call my “buy and forget portfolio.” It includes four stocks and one fund that, in theory at least, you won’t have to worry about.
Yes, if they market dives, they’ll drop with it. But, they will come back. In the long-term, their outlooks won’t be affected much by what happens in Greece, Italy, or even in Washington, DC. Plus, they all pay solid dividends. So you get paid, no matter what happens.
Vanguard Total Bond Index (BND)
Vanguard, an exchange-traded-fund (ETF), tracks an index that represents a large variety of medium-term government, government sponsored, and corporate bonds. The fund pays monthly dividends, which currently equate to a 3.2% dividend yield. Historically, it has very low volatility, which means its share price doesn't move around much. In fact, I consider the Vanguard Total Bond Index to be a potential alternative to money market funds and CDs, which you probably know, are paying 1% or less these days. However, unlike most bank accounts; your principal is not insured by the U.S. government. Spikes in interest rates or inflation typically sink bond prices. Such events are unlikely for at least the next year or so.
McDonald’s needs no introduction. But you may not realize that, while only growing sales in the U.S. around 4% annually, McDonald’s is rapidly expanding overseas. In fact, for the first six months of this year, total sales rose 12% compared to the same period last year. Because McDonald’s sells relatively low-priced products, its expansion rate won’t be hurt much by an economic slowdown. Last month, McDonald’s raised its dividend by 15% bringing its dividend yield up to 3.2%.
Altria Group (MO)
Cigarette maker Altria operates the U.S. segment of what used to be known as Phillip Morris. Brands include Marlboro, Parliament and Virginia Slims. Besides for cigarettes, Altria also makes cigars and smokeless tobacco products. Altria pays dividends equating to a 6.1% yield. Counting dividends and share price appreciation, you can expect around 10% to 12% total returns, on average, annually.
HJ Heinz (HNZ)
Besides for ketchup, Heinz makes condiments, sauces, frozen foods, soups, beans and pasta meals, infant food, and many other packaged food products. Brands include Lea & Perrins, Ore-Ida, Weight Watchers, Boston Market and T.G.I. Friday’s. Similar to McDonald’s, Heinz is growing rapidly overseas, especially in emerging markets, and its growth is unlikely to be affected much by economic ups and downs. Global sales growth is running around 8% annually. Heinz is paying dividends equating to a 3.8% yield and typically raises its payout around seven to 9% annually.
Pepco Holdings (POM)
Pepco is an electric and natural gas utility serving customers in Delaware, Maryland, New Jersey and Washington, DC. The thing that many investors hate about utilities is that they are so boring. The great thing about utilities in this market is that they are so boring. Sometimes they have a bad quarter because the summer wasn’t hot enough, or the winter wasn’t cold enough. Sales might be off in a recession. If, the stock market plunges, utility stocks go down too.
But assuming that you stick with well-managed utilities; long-term none of that matters much. Utilities’ don’t have to worry about competition or new technologies making their products obsolete. Dividend cuts are a rarity. Pepco‘s payouts equate to a 5.7% dividend yield. Counting share price appreciation, expect around eight to 9% average annual return.
These are my best ideas for stocks and funds that you can buy and forget. I suggest that if you like the concept; buy all five. Don’t try to cherry pick the list. Some will do better than others, but you can’t know which is which in advance.
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