Parker Hannifin (PH +0.35%), Johnson & Johnson (JNJ +0.58%) and Lowe's Companies (LOW +1.96%) represent stability for investors. Combined, they have been in business for more than three centuries. These value stocks won't make you rich overnight, but all three are the type you can buy and forget about because of their diversity and consistent growth, along with their competitive advantages.
The first two are Dividend Kings, meaning they have raised their quarterly dividends for 50 or more consecutive years, while Lowe's just increased its dividend for its 49th consecutive year. That commitment to share returns is another reason to buy the stocks and turn them into long-term holds. I own all three stocks and sleep more easily knowing that I do.
Parker Hannifin's products are pervasive
Parker Hannifin, founded in 1917, isn't well-known to consumers because it sells its products to industry and government buyers, but the company's reach is huge. It makes motion and control technologies and systems, everything from aerospace valves to medical device components to flanges and hydraulic motors. The company operates in two segments, Aerospace Systems and Diversified Industrial.
NYSE: PH
Key Data Points
What should matter to investors is the company's total return of 367.8% over the past 10 years.
Parker is coming off a fiscal third quarter, where it reported record revenue, earnings before interest, taxes, depreciation and amortization (EBITDA) margin, net income and earnings per share (EPS).
| Metric | Q3 2023 | Change over Prior Year |
|---|---|---|
| Revenue | $5.1 billion | 24% |
| Net Income | $590.9 million | 70% |
| EBITDA Margin | 22.4% | 43% |
| EPS | $4.54 | 23% |
Chart by author. Source: Company filing.
Parker's recent growth is due in part to the company's $8 billion acquisition last summer of British manufacturer Meggitt, which makes parts for the aerospace, defense and energy markets. Parker has bought 80 companies over the past 20 years, gaining market share all the while.
The company used the big quarter to retire $615 million in debt and to increase its quarterly dividend by 11% to $1.48, the 67th consecutive year it has increased its dividend. Though the yield, at around 1.3%, is below the S&P 500 average yield of 1.6%, the company has been aggressive in boosting it by 228.9% over the past decade.
Johnson & Johnson is unstoppable
Johnson & Johnson, founded in 1886, has had numerous setbacks in recent years, from talc and opioid lawsuits to a COVID-19 vaccine that was outshined by competitors. Despite those problems, the company has set annual revenue records for the past six years. Over the past 10 years, it has increased annual revenue by 33.14% while increasing EPS by 39.92% over that period.
NYSE: JNJ
Key Data Points
That kind of growth is impressive considering the company's huge size, with a market cap of more than $430 billion and more than 150,000 employees. Now that it has spun off its Consumer Health segment into a new company, Kenvue, Johnson & Johnson expects to see greater growth as it focuses on its remaining segments, Pharmaceutical and MedTech.
The concern about the lawsuits has helped keep the healthcare company's share price low (it's still down more than 4% this year), meaning the stock is far from overpriced, in my opinion. It trades at slightly more than 15 times forward earnings, below most large pharmaceutical companies.
The company just reported second-quarter earnings and upgraded yearly guidance. The company said it had revenue of $25.5 billion, up 6.3%, year over year and EPS of $1.96, up 8.9% over the same period last year. Management now expects yearly revenue between $98.8 billion and $99.8 billion, up 7% at the midpoint over 2022. It also raised adjusted EPS to fall between $10.70 and $10.80, up 6% from last year's midpoint.
Maybe the best thing that makes Johnson & Johnson a forever stock is its quarterly dividend, which it has raised for 61 consecutive years, including a boost of 5% this year to $1.19, delivering a yield of around 2.7%.
Lowe's is building its brand
Home improvement chain Lowe's, founded in 1921, has delivered a total return of 521.1% over the past decade while improving yearly EPS by 375.2%.
NYSE: LOW
Key Data Points
The company has increased annual revenue for 13 consecutive years. However, it has downgraded expectations for this year thanks to lower lumber sales. It said it expects annual sales of $87 billion to $89 billion, down 4% to 2% compared to 2022.
In the first quarter, it reported sales of $22.3 billion, down 4.3%, year over year, though EPS was $3.77 compared to $3.51 in the same period last year.
I still like Lowe's stock because the company has always been willing to innovate. This month, it made two big moves that should help its business. Lowe's had been running a pilot program for same-day online orders in Charlotte, N.C., and on July 19, announced it will expand the program nationally. The company is partnering with OneRail, an omnichannel fulfillment solution company, on the plan.
The other move should help increase foot traffic, particularly in the company's rural locations. On July 20, it said it would expand a pilot partnership from 15 Lowe's stores to 300 locations by the end of 2023 to sell Petco products and services. Lowe's said the move, which will provide greater access to pet supplies and veterinary care, will be more convenient for consumers in rural communities. With more than 70% of U.S. households owning a pet, the plan could give Lowe's an edge over its rivals.
Another reason to buy and hold the stock forever is its quarterly dividend, which it just raised by 5% to $1.10, meaning a yield of around 1.3%. Over the past decade, Lowe's has lifted its dividend by 511.1%.
