Investing for retirement can seem like a daunting process at first, but it doesn’t have to be.
When selecting companies to buy and hold for the long term, you need to have several objectives in mind. Specifically, companies qualifying must have a strong competitive advantage, durable business model and history of producing returns for shareholders.
If you find companies that meet all of these criteria, they’re more than likely to be great long-term investments, allowing you to sleep safely in the knowledge your hard-earned money is safe.
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Time-tested
Unilever (LSE: ULVR), is one company that I believe has all the traits required for buy-and-forget investments.
For a start, the business is highly defensive. Unlike more cyclical companies, Unilever is more likely than not to see steady earnings growth every year. The company is active in virtually every market around the world and most of the world’s consumers will come into contact with some of its products every day.
With this being the case Unilever has the potential to grow just through population growth alone. Despite its size, earnings per share have increased at a steady rate of around 4% per annum for the past decade and City analysts expect this growth to continue. Earnings growth of 10% is expected for this year and further earnings expansion of 9% for 2018.
Unilever’s shares currently trade at a forward P/E of 21.6 and support a dividend yield of 3.6%.
Deep moat
The world’s most famous investor likes to look for companies with a wide economic moat and I believe National Grid (LSE: NG) has one of the widest moats of all public companies.
National Grid controls virtually all of the UK’s electricity infrastructure, a network built up over hundreds of years requiring tens of billions of pounds of investment. It’s unlikely National Grid will ever see any serious competitors and therefore it’s extremely well-positioned to generate long-term returns.
That said, National Grid is no spring chicken and the company is unlikely to report explosive earnings growth. Nonetheless, as an income investment, it’s one of the best there is.
Shares in the company currently support a yield of 4.6% and management has committed to increasing the payout in line with inflation for the foreseeable future.
Long-term market
Standard Life (LSE: SL) has many competitors, but the company’s economic moat lies in its business model. The group provides long-term savings products, which will always be in demand. What’s more, consumers looking to invest in such products will always choose the largest provider with the best reputation to ensure that they don’t lose their hard-earned money.
Standard Life is both one of the biggest pension providers in the space and one of the most reputable so will likely see customer interest in its offering for a long time to come. As well as its dominant stance in the pensions space, Standard is also a dividend champion. Shares in the company currently support a dividend yield of 5.5%. The yield is expected to hit 6.4% by 2018.
