2 stocks that can create lasting generational wealth

Being boring and reliable aren’t exciting qualities for a company to have, but they are qualities that can help build generational wealth.

Investors often try to get rich fast, buying stocks that are going up rapidly. The problem is that sometimes those stocks eventually die. Another reliable way to build generational wealth is to build a strong foundation of boring, reliable companies. It’s even better if those companies pay dividends that can be reinvested over time.

Right now, you might want to consider the companies that “help you sleep better at night” Realty Income (O -0.16%, And Unilever ( UL -0.16%,,

Realty Income is huge and has a high yield

Perhaps the biggest attraction for Realty Income right now is the real estate investment trust’s (REIT) 5.8% dividend yield. That’s near the highest levels of the past decade and far above the 1.3% it offers. S&P 500 Index. You can use the monthly dividend to pay for living expenses, or reinvest it to increase your growth over time.

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Realty Income is the largest net lease REIT by a wide margin. Its next closest peer is less than one-third the size. Net leases require this landlord’s tenants to pay most of the property-level operating costs, which helps reduce risk for Realty Income. The company’s 15,400 properties and investment grade rated balance sheet further reduce the REIT’s risk profile.

But what sets Realty Income apart from its competitors is its access to capital. This is directly tied to the REIT’s size, making it easier to sell both loans and shares. With a generally low cost of capital, Realty Income can be more aggressive with acquisitions and still earn solid profits. While investors shouldn’t expect rapid growth (its massive size limits it), slow and steady is likely to be the name of the game in the coming years as Realty Income continues to buy properties in the U.S. and Europe.

Here, a three-decade-long dividend streak is expected to continue for many more years, helping shareholders accumulate wealth that can be passed on to the next generation, even if you’re benefiting from that income today.

Unilever is shifting its business

Unilever is one of the world’s largest and oldest consumer goods companies. Today, its dividend yield is about 3.3%. That’s lower than the average for the company over the past decade. But the real story is about future prospects.

First, Unilever is a bit of a laggard compared to its peers. That’s not a great thing, but management is working on this problem. Much has changed, and there’s still a lot to happen. Notably, the company transitioned from an awkward dual listing structure to listing only in the United Kingdom, which simplified the business. It’s also working on removing slow-growing businesses like tea, so it can focus on growing faster operations through bolt-on acquisitions like Liquid IV.

The next big change will be eliminating the ice cream business, which bears little resemblance to the rest of the company’s operations. Helping the process along is activist investor Nelson Peltz, who helped transform Pierce Procter & Gamble Not that long ago. So here’s a story of a makeover.

But there’s more that long-term investors should know. Emerging markets make up about 60% of the company’s total revenue. Although developed markets tend to be more reliable performers, they also tend to be slower growers. Having a heavy weight in emerging markets should give Unilever a long-term growth edge over its competitors. If you’re thinking about decades, building wealth over generations, then getting some consumer staples exposure in emerging markets should be very attractive to you.

This is not the story today – this is the story of tomorrow

To be fair, neither Realty Income nor Unilever is exactly succeeding right now. And neither of these companies will blow you away with growth. But they have proven time and again that they know how to thrive over the long haul. And there are certain aspects of each of them that suggest they will be able to continue rewarding investors with slow and reliable growth in the years to come. That’s how you build wealth that you can pass on to your heirs.

Reuben Gregg Brewer has positions in Procter & Gamble, Realty Income, and Unilever. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Unilever PLC. The Motley Fool has a disclosure policy.


Disclaimer : The content in this article is for educational and informational purposes only.

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