An investing resolution that will pay off

The new year is the traditional time to make resolutions on things we'd like to do better. And unless you've already mastered the stock market, you may find that you have room for a resolution or two for improving your investment strategy.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The new year is the traditional time to make resolutions on things we'd like to do better. And unless you've already mastered the stock market, you may find that you have room for a resolution or two for improving your investment strategy.

Unfortunately, resolutions are notoriously hard to keep. If they weren't, we'd all be rich, thin, non-smoking marathon racers.

But what if there were a way to get paid to keep your resolutions? Wouldn't that help motivate you, at least a little bit?

Fortunately, there often are ways to get paid from your investments, regardless of whether you're resolving to improve your ability to buy, sell, hold, or sock away more. This first article focuses on how to get paid to hold on to good companies.

The power of time and compounding
Warren Buffett has famously said that his favourite holding period is forever. In order to meet Buffett's criteria of a "forever" stock, though, the company needs to have both an outstanding business and outstanding management. That's a tough hurdle to clear, but the rewards of success can be tremendous.

Holding even a good company's stock forever is challenging, especially once you stop working and start trying to live off your investments. After all, if you need cash, there are really only two ways to get it from your portfolio: sell a stock or collect a dividend. That dividend can be mighty powerful, as it's not only how you can collect cash from your investment without selling, but it's also often a hallmark of an exceptionally strong company.

Indeed, if you take a look at the companies in the Berkshire Hathaway portfolio that Buffett manages, you'll see dividend titans galore. Berkshire owns significant stakes in companies that not only pay good dividends, but also consistently raise them, too.

Peeling back Berkshire's covers
For instance, Buffett's Berkshire owns 200 million shares of Coca-Cola, a company that has paid higher dividends in each of the past 49 consecutive years. That's a tremendous track record, and it's fuelled in large part by Coca-Cola owning the world's best global brand. It takes a powerful business to consistently deliver profitable growth while turning over ever-increasing sums of money to shareholders. Yet Coca-Cola has managed to pull it off, which helps explain why Buffett continues to own it.

Berkshire is also a part owner of ExxonMobil, a business with a 29-year streak of increasing dividends. While the past few years have seen strong oil prices, the past 29 years also included the late 1990s, a time when oil prices had fallen into the low teens. Keeping that streak alive during a time like that shows that ExxonMobil does more than just profitably ride the commodity's coattails. Indeed, it showcases the company's focus on operating effectiveness.

Also in Buffett's Berkshire portfolio is Wal-Mart, a company that managed to grow to be the world's biggest retailer while still maintaining a 37-year tradition of paying higher dividends. How can a company with a slogan of "Save More. Live Better." simultaneously reward its customers with low prices and its shareholders with higher dividends? The answer is straightforward: It's a very well managed business that focuses on controlling its own costs to be able to pass savings on to consumers.

Strong-enough companies led by solid-enough leadership teams with good-enough dividend histories provide enough impetus to even pull the once-resistant Buffett into technology stocks. Recent purchases of IBM and Intel show what it takes to turn Buffett into a technology investor. IBM's 16-year and Intel's 8-year history of rising dividends likely played a part in those decisions, as that dividend track record would not be possible without solid, long-term execution.

Find your own forever stocks
If your investing resolutions include a desire to hold on to good companies, there's nothing like getting paid a good, solid, and increasing dividend to do that. Whether you choose to follow in Buffett's footsteps or to find other companies you'd like to own forever, a rising dividend is a great thing to see. The routinely increasing payments not only help you hold as the market moves, but the incredible strength it takes to keep those raises going helps you truly understand the company's staying power.

For investors looking for a growing ASX company with a solid dividend yield might want to check out our free special report — "The Motley Fool's Top Stock for 2012". Grab a free copy of that report by clicking here.

More reading:

Five Big Threats In 2012

Successful investing: Who cares?

The Motley Fool's purpose is to educate, amuse and enrich investors. Click here to be enlightened by The Motley Fool's disclosure policy. This article, written by Chuck Saletta, was originally published on

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »