When you think of the most popular stocks owned by Robinhood‘s (NASDAQ:HOOD) customers, more speculative investments like meme stocks are probably the first that come to mind. But there are also steadier options that should make shareholders much richer.
Johnson & Johnson (NYSE:JNJ), Pfizer (NYSE:PFE), and Visa (NYSE:V) are three widely held companies among Robinhood’s customers. Let’s take a look at why buying these stocks could be among the savvier moves of your investing career.
1. Johnson & Johnson
It’s not surprising that Johnson & Johnson is a mainstay in many portfolios — thanks to such well-known brands as Neutrogena and Aveeno (part of the consumer health segment that will soon be spun off to form an independent company).
Johnson & Johnson is also well-known for its track record as a Dividend King, raising its payout for an astounding 59 consecutive years. But what’s most important is the future, and it looks as if the company can maintain this success in the years ahead. What makes me so confident?
First, Johnson & Johnson’s dividend is quite sustainable given that its payout ratio stands at about 43%, using the $9.80 midpoint of its non-GAAP (adjusted) earnings-per-share (EPS) guidance for the year.
Second, J&J’s pipeline has 47 medical indications in late-stage clinical trials. This should offset the upcoming patent expiration of its top-selling drug, Stelara, around 2025 — and it’s why analysts are forecasting that the company will generate 8% annual earnings growth over the next five years.
Finally, at a forward price-to-earnings (P/E) ratio of just 16.5, Johnson & Johnson shares can provide investors with a decent amount of growth at a reasonable valuation. When we pair its 2.5% dividend yield with 8% annual earnings growth, the stock appears positioned to deliver 10% annual total returns for the foreseeable future.
All of these factors are what make Johnson & Johnson a smart buy for long-term investors.
Most people around the world recognize Pfizer for its top-selling COVID-19 vaccine, Comirnaty, which it co-developed with Germany’s BioNTech (NASDAQ:BNTX). Pfizer anticipates the drug will produce $29 billion in revenue in 2022. But as Pfizer leads the battle against COVID with Comirnaty along with its oral treatment Paxlovid, investors might lose sight of the company’s strong non-COVID portfolio.
Through the third quarter of 2021, Pfizer’s other vaccines and medications helped the company to grow its revenue (excluding Comirnaty’s $24.3 billion) by 10.4% year over year to $33.4 billion. Drugs like anticoagulant Eliquis (co-owned with Bristol Myers Squibb (NYSE:BMY)) and rare heart disease drugs Vyndaqel and Vyndamax were pivotal contributors to Pfizer’s sales growth.
Pfizer’s COVID leadership during the past couple of years has resulted in a significant uptick in profitability. It is why its dividend payout ratio is just 27% based on the $1.60 in dividends per share that should be paid out this year, and so that leaves plenty of room for future dividend growth.
Investors can secure Pfizer’s market-topping 2.7% dividend yield at a forward P/E ratio just under 10, which is a bargain in light of the 18% annual earnings growth that analysts are projecting over the next five years. This arguably makes Pfizer a no-brainer Robinhood stock to purchase for the long run.
Most consumers throughout the globe are familiar with payments processor Visa, which is unsurprising given that its network had more than 3.7 billion debit and credit cards in circulation as of last June. Yet, Visa’s leadership in the $45 trillion global card payments market only scratches the surface.
Visa’s scale and brand recognition should also allow it to capture market share in the $140 trillion global person-to-person and business-to-business payments market. Visa took a step toward seizing share in this huge arena with its recent acquisition of Currencycloud, which gives businesses the capability to move money across borders and easily transact in multiple currencies.
As a result of this major growth catalyst, analysts are predicting that Visa will provide shareholders with 18% annual earnings growth over the next five years. With its shares priced at a forward P/E ratio of 31 — in line with its five-year average — Visa seems poised to create robust total returns for shareholders in the years to come. That’s why it is a compelling buy-and-hold stock for growth investors.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.