HomeMost Popular2 Magnificent Dividends To Buy And Hold Forever

2 Magnificent Dividends To Buy And Hold Forever

Actionable Trade Ideas

always free

Big alarm clocks are in the water and man with umbrella watches them

Co-authored with β€œHidden Opportunities”

Have you ever made a financial investment that has proven to be tremendously valuable over time? Perhaps it was a book that shifted your perspective, a memorable trip, or an educational event that ignited new passions.

These types of investments, whether tangible or intangible, can greatly enhance our lives in the present and pave the way for future success. And just like these personal investments, there are also investment opportunities available on the stock market that can provide consistent dividends for years to come.

Renowned investor Warren Buffett often mentions his prized long-term investments in companies like Coca-Cola (KO), American Express (AXP), and GEICO, which consistently generate billions in dividend payments each year.

β€œThe cash dividend we received from Coke in 1994 was $75 million. By 2022, the dividend had increased to $704 million. Growth occurred every year, just as certain as birthdays. All Charlie and I were required to do was cash Coke’s quarterly dividend checks.” – Warren Buffett

Today, we will explore two dividend-paying picks that offer predictable and secure yields, making them excellent additions to any long-term investment portfolio.

Pick #1: AFG Baby Bonds – Up To 6.5% Yields

The history of American Finance Group, Inc. (AFG) dates back to its establishment in 1872 as the Great American Insurance Company. Today, AFG is a global leader in specialty property and casualty insurance, with over 120 locations worldwide and 7,500 employees.

AFG’s commitment to underwriting excellence is evident in its consistent performance. The company’s combined ratio, a measure of profitability in the insurance industry, has remained below 94% for ten consecutive years. A ratio above 100% indicates that an insurance company is paying more in claims than it is collecting in premiums.

In FY 2023, AFG expects its specialty property and casualty overall combined ratio to be between 89-91%, demonstrating strong underwriting profitability. The company’s solid financial position is further supported by its A+/A1 credit ratings from leading credit agencies.

Recently, AFG’s board approved a 12.7% year-over-year increase in the regular annual dividend to $2.84 per share. The company also has no debt maturities until 2030 and maintains a strong balance sheet with ample cash and short-term fixed maturities.

AFG actively repurchases its shares and has a remaining repurchase plan of 7 million shares. With strong insider alignment and favorable market conditions, AFG’s publicly traded subordinated notes, commonly known as baby bonds, offer attractive yields and investment grade ratings.

  • 5.875% Subordinated Debentures due March 30, 2059 (AFGB)
  • 5.125% Subordinated Debentures due December 15, 2059 (AFGC)
  • 5.625% Subordinated Debentures due June 1, 2060 (AFGD)
  • 4.50% Subordinated Debentures due September 15, 2060 (AFGE)

AFG’s financial strength, operational excellence, and investor-focused capital allocation make these baby bonds appealing options for investors seeking reliable income and potential capital growth.

Pick #2: RLJ Preferred – Yield 8.2%

Recent data indicates a strong rebound in travel and leisure activities, with domestic and international bookings surpassing pre-pandemic levels. Sunbelt states in the U.S. are leading the recovery in the hotel industry, demonstrating the importance of travel and leisure in the post-pandemic era.

RLJ Lodging Trust (RLJ), a hotel real estate investment trust with a significant presence in sunbelt states, has been benefiting from the resurgence in travel. With approximately 51% of its EBITDA exposure in the sunbelt states and a portfolio concentrated in urban centers, RLJ is well-positioned to capitalize on the growing demand.

In Q2 2023, RLJ reported strong business travel numbers, reaching 71% of 2019 levels. The company’s urban market concentration has contributed to RevPAR growth, which exceeded industry benchmarks for the second consecutive quarter. Despite challenges such as adverse weather and strikes, RLJ achieved a RevPAR increase of 4.5% YoY, reaching 96% of pre-pandemic levels.

RLJ’s commitment to value creation is evident through its share repurchase program, dividend increases, and strong financial profile. The company’s free cash flow, robust balance sheet, and staggered debt schedule provide ample support for its shareholder-friendly initiatives.

Investors looking for long-term income prospects can consider RLJ’s convertible preferred security. The cumulatively preferred shares offer a fixed income stream and potential capital appreciation, with RLJ’s growing common dividend providing additional safety.

  • RLJ Lodging Trust, $1.95 Series A, Cumulative Convertible Perpetual Preferred Shares (RLJ.PR.A)

The convertibility feature of RLJ.PR.A adds an extra layer of investment security. However, given the significant upside required for conversion to occur, investors can expect steady income without the risk of conversion. With attractive annual yields and the anticipation of lower interest rates, RLJ.PR.A presents a compelling investment opportunity.

Conclusion

Some investments can be held indefinitely, providing consistent value over time. In this report, we have discussed two picks that offer stable fixed income and the potential for long-term growth. These investments offer predictability in the face of market volatility. Share your own standout purchases in the comments section and how they have exceeded expectations and provided enduring value in your life.

Swing Trading Ideas and Market Commentary

Need some new swing ideas? Get free weekly swing ideas and market commentary from Jonathan Bernstein here: Swing Trading.

Explore More

Weekly In-Depth Market Analysis and Actionable Trade Ideas

Get institutional-level analysis and trade ideas to take your trading to the next level, sign up for free and become apart of the community.