LONDON — Investing doesn’t have to be a full-time job — or even the thing you’re most passionate about. (Though if it is, we may have a spot for you at The Motley Fool!)
The truth is, you’re busy. You love your money. You’ve worked hard for it and don’t want to watch it idle away in a bank.
But you probably don’t want to obsess about it day in and day out, either.
If this sounds like you, you may be a set-and-forget investor. This means you want to find and own shares in the types of companies that provide a good mix of portfolio stability, peace of mind, and extra income.
Let’s take a closer look.
Size and stability
GlaxoSmithKline plc (ADR) (LSE:GSK) is a massive, 72 billion pound company with a long tenure in the pharma industry and a strong history of returning cash to shareholders. Though not impossible, wild share price swings in a company like Glaxo are unlikely.
In fact, since July when I first mapped out the five stocks for busy investors, Glaxo has essentially been flat. The FTSE All-Share, by comparison, is up 14% over the same period.
Did I get it wrong?
Not necessarily. Glaxo likely hasn’t caused shareholders many sleepless nights because the share price has been so steady. It also consistently throws off a lot of cash in the form of dividends.
In 2012 alone, GlaxoSmithKline returned 8.8 billion pounds to shareholders through share buybacks and dividends. It currently pays about a 5.1% yield, edging out the pharmaceutical average of 4.8% — and leaving your savings account rate in the dust.
So, what shareholders may have missed in share price appreciation, they’ve made up for — in part — with quarterly dividends of about 17 pence per share.
Consistent and growing cash flows and revenue
Set-and-forget investors can be well served looking for recession-resistant companies for their portfolio. I plucked Unilever plc (ADR) (NYSE:UL), a consumer staples giant with an incredibly steady business, for this very reason. People need the products Unilever sells (think soap, washing-up liquid, margarine, and the list goes on).
Unilever has an established position here in the U.K. as well as a growing presence in emerging markets. With a diverse range of products being sold worldwide, Unilever has a solid, tenured business that puts up consistent cash flows and pays a reliable and well-covered dividend yield (currently about 3.4%).
If you’d set-and-forget this one in July, you’d have seen a nice 18% increase in your shares, plus you’d have received a near-4% dividend paid last October.
Competitive advantage, aka “moat”
When I think about a company with a strong competitive advantage, drinks-maker Diageo plc (ADR) (NYSE:DEO) comes to mind. This company owns a huge range of spirits brands and has a massive distribution network worldwide. It is hard for new entrants to the market to gain ground on — and chip market share away from — Diageo.
Shares in Diageo have lagged the market a bit since my last review in July, posting gains of about 11% against the FTSE All-Share’s 14% advance. Shareholders were, however, sheltered from any wild swings in the share price — and rewarded with a final dividend payment of 27 pence per share in October.