The only thing better than buying a high quality stock is being able to buy it at an outstanding price, and then letting its value accrue over the ultra-long term. This is particularly the case when the company pays a handsome dividend which can be reinvested for even more superior investment returns.
By focusing on the long-term, it's vital to ignore some of the short-term issues facing the economy and to instead focus on the bigger picture. That is, to consider which companies have considerable growth prospects and which companies will still play a vital role in the economy in the years, and even decades down the track.
Woolworths Limited (ASX: WOW) is one such company. The supermarket behemoth has delivered enormous returns to investors in recent decades and has consistently grown earnings and increased dividend payouts. Yet the stock has come under fire recently based on concerns for its Masters Home Improvement chain, and the potential threat being posed by Costco and Aldi. In reality, it could instead be argued that Aldi and Costco are doing Woolworths (and Coles – owned by Wesfarmers Ltd (ASX: WES)) a favour by squeezing more of the smaller players from the Australian market.
While the shares are sitting near a two-year low, investors should strongly consider taking the opportunity to stock up on Woolies. The company is currently forecast to pay a 4.7% fully franked dividend this financial year which should only increase in the years ahead.
Another company worth considering is Coca-Cola Amatil Ltd (ASX: CCL), Australia's embattled beverage manufacturer. The stock has had a disastrous run over the last couple of years but the tide could soon change, rewarding those investors who remained patient (and indeed, those who buy the shares now). The company has identified ways to improve costs by approximately $100 million annually while a stronger focus will also be applied to marketing and product development to strengthen the brand's image.
While the stock could still have further to fall, investors who buy today stand a good chance to recognise market-beating returns over the coming years. The stock is trading at just $9.31, offering a forecast 4.4% dividend yield (franked to 75%).
Investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is also a solid bet for the ultra-long term. Soul Patts, as it is commonly called, is seen as Australia's answer to Berkshire Hathaway, the company run by investing legend Warren Buffett. Run by a world-class management team, Soul Patts offers exposure to numerous sectors including construction and telecommuncations through its significant investments in Brickworks Limited (ASX: BKW) and TPG Telecom Ltd (ASX: TPM). Right now, the shares are changing hands for $13.69 while the company is expected to pay 47 cents per share in dividends in FY15, a yield of 3.4% (fully franked).
Woolworths, Coca-Cola Amatil and Soul Patts all present as excellent buys today, but there is another company early in its growth story which could deliver far greater returns over the coming years.
