If you chose five good stocks today and kept them for 10 years, it'd be more likely than not that your wealth would increase. Buying a mixture of income, growth, core, value and blue chip stocks will help you diversify your share market exposure and protect your nest egg.
With so much volatility in market, savvy investors are buying up great stocks at even better prices. Here are five stocks you should consider adding to your watch list or portfolio.
Income
Income is important for many investors who prefer to be rewarded for risking their money in the market. There's no doubt that with interest rates so low and going lower, fully franked yields are very attractive. Currently over 85% of my portfolio has dividends that pay over 5% when franking is taking into account. However buying stocks purely for income purposes has shown time and again that it can be risky and if investors can't handle volatility, perhaps fixed income securities or term deposits are more appropriate.
An S&P/ASX 200 (ASX: XJO) (Index: ^AXJO) listed stock that pays exceptional dividends and continues to be resilient in tough times is Metcash (ASX: MTS). At current prices, Metcash pays an exceptional 8.0% fully franked return but also provides healthy amounts of growth.
Growth
Telecommunication companies pay great dividends but also provide investors with good long term prospects. With the internet playing a more and more important role in our everyday lives, connecting your mobile phone or computer to the net is almost a necessity.
Since 2009, M2 Telecommunications (ASX: MTU) has risen an amazing 1,188.17%. This week the company bought a 12% stake in Australian wholesale telecommunications services provider, Inabox, for $2 million which shows the company is still eager to impress shareholders with growth in the near term. However, it's purchases of Dodo, Eftel and primus telecom in the past two years has not yet been fully realised in results and should allow the company to continue its healthy trend line for a few years yet.
Core
Companies that have lived through recessions, GFCs and depressions come out more efficient and smarter than they were previously. For a company that has been listed since 1902, Washington H Soul Pattinson (ASX: SOL) has certainly done something right. Whether it's the companies diversified business model or extremely retentive work force, one thing is for sure, WHSP is an excellent long term stock that could fit in any investors' portfolio.
Value
Unloved industries are the shopping centres for value investors. Sometimes the best stocks live next door to the most shorted stocks or the ones going out of business. Possibly two of the most unloved sectors at the moment are mining services and retail but there are possibly plenty of bargains to be had in each.
One retail stock that has only been listed for a few years is Myer (ASX: MYR). Since its IPO back in late 2009, the company has been unable to reach its initial price but may have fallen too far in recent months. After reaching a high of $3.20 in April, the stock fell more than 30% in just two months but has begun a slight rally in a healthy direction. At current prices, it has a price to earnings of 10.9 and pays a whopping 7.8% fully franked dividend.
Blue chips
Australia's top eight stocks control approximately 40% of the Australian stock exchange. With huge market capitals and great yields, it's no wonder they continue to be traded so heavily. Over the past 10 years, many blue chips have served investors well and continue to look promising.
ANZ (ASX: ANZ) pays fully franked dividends and offers a massive market capital that screams safety. The past decade has seen its share price rise of over 50% PLUS dividends but perhaps it's the next 10 years that will impress shareholders even more.
No doubt the coming years will be tougher for our big banks as they face a sluggish housing sector, less mining investment and wobbly overseas markets. However, ANZ may be the exception to the rule. With a strategy to take advantage of the rising wealth in Asia, the bank believes that 25-30% of revenues will stem from the region by 2017 and hopes to become a regional super bank in the next decade.
Foolish takeaway
It's easy to look at stock growth over a five- or 10-year period and be confident, but you don't drive your portfolio looking through the rear view mirror. Investors need to find good quality stocks that have an eye for long term growth and should reward you with dividends. Remember to take your time and only buy the best stocks, after all patience doesn't lose you money and you only deserve the best.
The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!
More reading
- 10 stocks to hold forever
- 5 healthy stocks for your portfolio
- Lots of movement, no progress
- 10 of the ASX's best dividend plays
Motley Fool contributor Owen Raszkiewicz owns shares in Myer, ANZ, M2 Telecommunications and Metcash.
