John Rosevear, Chuck Saletta, and Cory Renauer, The Motley Fool
Updated
A lot can happen to a company in 13 years. It's notoriously difficult (many would say impossible) to predict a company's path more than a few quarters out. Things happen: scandals, accidents, surprise acquisition offers -- and, of course, disruption from faster-moving new entrants.
Still, there are some companies that seem like very good bets to be around for a while. A few are even good bets for growth over the next decade-plus. Here's why our Foolish investors think Medtronic plc (NYSE: MDT), Enbridge (NYSE: ENB), and General Motors (NYSE: GM) are particularly good choices for long-term-minded investors now.
A white Chevrolet Bolt EV with Cruise Automation logos and visible self-driving sensors is parked next to a dome.
GM might be first to market with a self-driving car. Its autonomous (and electric) Chevrolet Bolt EV is nearly ready for production. Image source: General Motors.
One old automaker that will shrug off "disruption"
John Rosevear (General Motors): I'm going to go out on a limb with this one. I predict that General Motors will be a great stock to own between now and 2030.
I know all the experts are telling us that self-driving cars and shared-mobility services will upend the traditional auto business as we know it. I think there's some truth to that, though the case is often way overstated. But here's the thing: Even if that all comes to pass, GM is going to be profiting in the midst of it. Consider the following:
GM beat everyone to market, even Tesla, with its affordable long-range, all-electric Chevrolet Bolt EV. It'll build on that lead with two more all-electric vehicles within 18 months and at least 30 new electric vehicles by 2023.
If GM isn't at the head of the self-driving pack, it's very close. GM's self-driving subsidiary, Cruise Automation, said last month that it has a "mass-producible" self-driving car ready to go. The only thing holding it back at this point might be the high costs of certain components, and GM is making aggressive moves to bring those costs down.
Ride-hailing? GM owns a chunk of Lyft, which might be an early customer for those self-driving Chevrolets. But there could be a profitable plot twist in the works: Signs are mounting that GM is gearing up to launch its own ride-hailing service.
When it comes to the new tech, GM has more bases covered than just about any big automaker -- and more than most of the tech upstarts, too. And unlike some of those upstarts, GM won't have any funding concerns. GM is very profitable right now, thanks to a hot-selling line of new crossover SUVs. And despite running up about 30% over the last few months, GM's stock is still fairly cheap at 7.8 times its expected 2017 earnings, with a nice 3.5% dividend yield.
It may take a few years for GM's profit-growth story to unfold. But investors who buy here and reinvest that dividend could be very happy with the results when 2030 rolls around.
Buying the future
Cory Renauer (Medtronic plc.): Companies that lead their respective growth industries tend to make great long-term investments. Older adults are the fastest-growing demographic in most developed nations, and they'll steadily raise demand for replacement heart valves, stents, and insulin pumps for at least another couple decades. Early investments helped my pick dominate these niches, and the company continues to invest in exciting new technologies.
For example, Medtronic recently upped its potential equity stake in Mazor Robotics to about 14.2% of the robotic surgical system developer's outstanding shares. Medtronic's investment of roughly $125 million is mere pocket change for a company that generated $4.9 billion in free cash flow over the past year, but it positions the company for another top spot in a rapidly growing niche. Going forward, Medtronic will develop spinal implants that take full advantage of the minimally invasive surgical techniques made possible by the robotic systems it markets for Mazor.
A recent voluntary recall of a disposable device used with the company's insulin pumps and the recent closing of a 5,000-employee facility have spooked investors into driving this stock down to an attractive price. The average stock in the S&P 500 trades at about 19.3 times forward estimates, but shares of this Dividend Aristocrat can be scooped up at just 16.6 times this year's earnings expectations. That's a lot less than you'd think for a company expecting adjusted earnings for the present fiscal year, which ends in April, to rise 9% to 10% higher than the year before.
The company recently upped its dividend for the 40th consecutive year, and the well-funded distribution offers a 2.4% yield at recent prices. Even though Medtronic has managed to raise its payout at a 17% annual rate over the past four decades, the company needed just 49.4% of free cash flow to make dividend payments over the past year. With strong advantages in a growing industry, you can reasonably expect this stock to continue providing more dividend income through 2030 and beyond.
An energy giant that promises substantial dividend increases
Chuck Saletta (Enbridge): Nothing proclaims "this is a strong company" quite as clearly as a supported, growing dividend. Still, because of the costs involved and the long-term risks a company exposes itself to if it skimps on its operations to fund its dividend, few companies are willing to promise long-term dividend growth. Canadian energy pipeline giant Enbridge (NYSE: ENB), however, has announced that it expects to increase its dividend by 10% to 12% annually between now and 2024.
That set of dividend increases gets you more than halfway between now and 2030. What gives you a high likelihood of making it all the way to 2030 with Enbridge is the fundamental nature of the business it's in. It moves energy -- oil and natural gas -- around the U.S. and Canada, getting that energy from where it's produced to where it's consumed.
The U.S. Energy Information Agency expects world energy consumption to increase between at least now and 2040, with much of that demand growth being met by natural gas and liquid fuels, like oil products. That energy will still need to be produced and transported to where it will be consumed. As North America's largest energy infrastructure company, Enbridge is well-positioned to expand to meet the demand of moving that energy around.
A strong company entrenched in an industry that will continue to be in demand for decades to come, Enbridge is well-positioned for consideration to hold a spot in your portfolio between now and 2030.
Chuck Saletta has no position in any of the stocks mentioned. His wife owns shares of Enbridge. Cory Renauer owns shares of Medtronic. John Rosevear owns shares of General Motors. The Motley Fool owns shares of and recommends Enbridge and Tesla. The Motley Fool owns shares of Medtronic. The Motley Fool has a disclosure policy.
