The ability to compound and grow your wealth is one of the most attractive aspects of investing. With inflation running rampant and interest rates rising to 22-year highs, you need to find a reliable place to park your money to ensure that it not only stays ahead of inflation, but can also increase steadily to provide you with a blissful retirement. Finding stocks with attractive characteristics to own for a lifetime is a great way to start the compounding process.
Some of the attributes you need to look for are businesses with a solid reputation, a long track record of rising profits and dividends, brands and products that are loved by customers, and a long runway for further growth. By including these stocks in your investment portfolio and letting time work its magic, you will slowly but surely enjoy steady capital gains and see your portfolio grow to an impressive size.
Here are three stocks with the above characteristics that you can own for the rest of your life.
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Roper Technologies
Roper Technologies(NASDAQ: ROP) designs and develops software and technology-enabled products to serve customers in industries such as education, law, utilities, and acute healthcare.
The company has demonstrated steady growth over the years while generating copious amounts of free cash flow. These characteristics have allowed it to raise its annual dividend for 31 consecutive years, including most recently a 10% increase to $3 per share. From 2020 to 2022, Roper saw its revenue increase from $4 billion to $5.4 billion. Earnings from continuing operations jumped 46% over the three years to $985.6 million. With low capital expenditure requirements, the business also generated an average three-year positive free cash flow to the tune of $1.4 billion.
For the first nine months of 2023, revenue increased by 16% year over year to $4.6 billion while operating income increased by 15% year over year to $1.3 billion. Net income climbed 34.2% year over year to $990.9 million. Free cash flow more than doubled year over year from $611 million to $1.3 billion.
Roper has grown through acquisitions over the years and 2023 is no different, with the company completing the acquisition of Syntellis Performance Solutions for $1.25 billion. Syntellis is a provider of cloud-based performance management and data solutions for the healthcare, higher education, and banking sectors. This acquisition will add $185 million to Roper's revenue for 2024 with cost savings being better than expected.
Investors can look forward to more acquisitions that will enable the company to grow further. Management is shopping around in the private equity space where there is a large and high-quality pipeline of potential acquisition candidates. This universe of acquisition opportunities should enable Roper Technologies to continue its acquisition-fueled growth for many more years to come.
Dover
Dover(NYSE: DOV) is a diversified manufacturer of consumable supplies, aftermarket parts, and software solutions with a team of over 25,000 employees. It's been a good business as the company has displayed steady revenue and earnings growth along with consistent free-cash-flow generation.
Revenue increased from $6.7 billion in 2020 to $8.5 billion in 2022 while net income surged from $683.5 million to $1.07 billion over the same period. Free cash flow averaged a positive inflow of $822.8 million over the three years, allowing Dover to pay out an increasing dividend. Dover's annual dividend has increased to $2.04 per share, marking the manufacturer's 68th consecutive dividend increase and putting it firmly in the ranks of Dividend Kings.
Dover's revenue saw a slight year-over-year dip in the first nine months of this year while net income fell by 5% year over year to $760.6 million due to higher costs. Despite the dip, Dover's free cash flow more than doubled year over year from $301 million to $688.4 million, demonstrating the company's knack for generating consistent positive free cash flow.
The company's Investor Day earlier this year provides a good preview of the growth that investors can expect from the manufacturer through 2025. Dover's portfolio of products is poised to deliver 4% to 6% annual organic revenue growth to hit its target of $10 billion by 2025. With 2022's segment margin at 20.6%,
Dover also sees potential margin upside in the range of 25% to 35% in two years. A mix of automation, product rationalization, cost control, targeted mergers and acquisitions, and digital initiatives should enable this steady improvement.
The company also plans to grow through acquisitions with ample opportunities to purchase strong businesses within its core markets. It spent around $2.1 billion on acquisitions from 2018 to 2022 and the company will be looking at possible larger deals if there is a good fit.
Investors can look forward not just to higher dividends over time, but also an improvement on the top and bottom lines.
Tapestry
Tapestry(NYSE: TPR) owns luxury fashion brands Coach, Stuart Weitzman, and Kate Spade, which sell handbags, footwear, and apparel. The company has a proven business model with almost 90% of its sales coming from direct-to-consumer channels.
Tapestry has demonstrated steady growth through the pandemic years, with net sales increasing from $5.7 billion for fiscal 2021 (ended July 3) to $6.7 billion in 2023. Net income grew from $834.2 million to $936 million over the same period. The luxury brand business also generated an average positive free cash flow of $920 million over these three fiscal years.
At Tapestry's Investor Day last year, management highlighted that the company more than tripled its digital sales from $600 million in fiscal 2019 to $2 billion in 2022 while also acquiring 15 million new customers in the U.S. amid increased retention rates.
The momentum has carried over into the first quarter of fiscal 2024 with Tapestry reporting a slight 0.4% year-over-year increase in revenue to $1.5 billion. Although gross margin expanded from 70% in the prior year to 72.5%, higher selling expenses resulted in net income remaining flat year over year.
Even so, the company continued to generate positive free cash flow for the quarter. Back in August, Tapestry purchased luxury fashion company Capri for around $8.5 billion to accelerate its growth ambitions. Capri owns famous brands Versace, Jimmy Choo, and Michael Kors and this deal will generate a double-digit increase in earnings per share for Tapestry as well as unlock cost savings of over $200 million within three years.
Tapestry has identified a total addressable market of $295 billion for the personal premium goods segment, implying a strong, sustainable runway for further growth. The market is also poised to grow at a 6% to 8% compound annual rate through 2025, providing ample opportunities for Tapestry to increase its top and bottom lines.
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Royston Yang has no position in any of the stocks mentioned. The Motley Fool recommends Roper Technologies and Tapestry. The Motley Fool has a disclosure policy.
