You can pass down these 'heirlooms'

There's a lot to like about solid companies with years of increasing dividends.

By Apr 9, 2013 12:11PM

Woman reading newspaper in Livingroom copyright Tetra images, Getty ImagesBy Martin Hutchinson, Money Morning

While the Dow has reached new highs recently, investing hasn't gotten any easier. When the markets make a major move higher, investors always run the risk of buying at the top. It's called chasing momentum, and it can be damaging to your portfolio.

But the truth is, you don't have to chase the market. There is a safer -- and in the long run more lucrative -- approach.

The stocks to buy are what I call "heirloom stocks." These are stocks you buy, hold and watch grow -- steady earners you can rely on to fund a growing prosperity in retirement, or leave to your grandchildren, knowing that the expenses of their lives will be covered.

Heirloom stocks are from a select group of 82 stocks listed on the NYSE or Nasdaq. Their key characteristic is that they have not only paid dividends for 20 years or more but have increased their dividends in every one of those years.

The longest of these has a history of dividend increases that extends back 59 years, to 1954. But all 82 of them have track records that go back to at least 1993. Surprisingly, there aren't a lot of borderline cases, either. Only two stocks have track records of between 20 and 29 years.

These are the stocks that should be an important base of any portfolio, especially one used for retirement purposes. Here are three heirloom stocks to add to your portfolio:

Procter and Gamble (PG), the consumer products company, has increased its dividend every year since 1954. It yields around 3% and its P/E is 17.5 times. The company's dividend has increased 820% since 1993, and its return on equity is 17.5%. As heirloom stocks go, PG is top quality.

Emerson Electric (EMR) provides electrical engineering products and services. It has increased its dividend every year since 1957. Its yield is 2.9% and its P/E is 20.4. The company's dividend has increased 460% since 1993, and its return on equity is 20.1%. Again, top quality, albeit a little expensive at the moment.

3M (MMM) has increased its dividend every year since 1959. It has a yield of 2.5% and a P/E of 16.4. It has enjoyed a less exciting 290% dividend increase since 1993, but the Consumer Price Index is up only 62% in that period. However, its return on equity is a stellar 26.6%. It may not be rapidly growing, but still makes for an excellent long-term investment.
All of these are stocks you can buy now -- even in these high-flying markets. In a time and place in the not too distant future, you'll be glad you did.

More from The Money Show

Apr 9, 2013 3:16PM
MMM is our family heirloom! My father (who passed away in March) built up 5100+ shares and with my moms social security, she now has decent money coming in for her retirement. He started buying about 6 to 10 shares a month since the early 70's. If she does not use the stocks themselves, this will be my family legacy hopefully passed down to each generation. 
For myself, I bought a lot of Ford when it was under $2.00 a share with the recession and now I have my own legacy I hope!
Apr 9, 2013 1:19PM
Apr 9, 2013 3:41PM

Great article.If people bought only rock solid stocks like these you wouldn`t hear

so many people claim the market is rigged.It`s rigged to go up if you buy stocks

that are in VIG.

Apr 9, 2013 4:53PM
Yesterday's dog is tomorrow's champion and visa - versa, like Apple, or IBM stock.  Even "staple" stocks can become a loser if they can't keep up with the competition.  Time and tech changes everything and unless the company can grow with the times, it can become obsolete and an albatross to an investor.
Apr 9, 2013 11:34PM
You call that an increase!? I just bought penny stocks of INKA and they plummeted 1000% in one week. Would have never happened with a regular stock. And the best part the price is going up at an incredible speed. It is only 1.15
Apr 9, 2013 4:21PM
Great stocks, all too expensive right now. I'll buy after the coming crash.
Apr 9, 2013 4:11PM
3 Chumps A Singing....................lmao.
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