3 Defensive Dividend Stocks to Buy and Hold for the Next 5 Years

Stocks to buy

Companies that pay dividends or return capital to shareholders via buybacks are well-loved by long-term investors. These profit machines provide the kind of portfolio stability in which investors can rely. Sleeping easy at night is key to maintaining financial discipline. And, holding such positions for long periods of time is important.

So, for those with time horizons extending five years or longer, these three companies should be considered. With proven track records, they are juggernauts in their respective industries. And their solid balance sheets and growth prospects provide greater capital return over time.

Let’s dive into these cash flow giants, because now may be a good time to start building a position in these names.

Berkshire Hathaway (BRK-A, BRK-B)

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Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) now holds 3% of the Treasury Bill market, with $158 billion of it in investment.

T-bills, which are short-term U.S. Treasury debt obligations, currently yield 5% to 6%. These investments have been favored by Buffett due to sky-high equity valuations and limited acquisition opportunities. Along with its robust $182 billion cash and treasury bills, the firm strategically keeps its stock undervalued.

This solid balance sheet and preference for stock buybacks is built atop a portfolio of dividend-paying stocks. They could be among the best in the world. Investors may come to Berkshire Hathaway for Warren Buffett and his team. Yet, most stay for the stability the company’s massive portfolio of wholly-owned and partially-owned companies provides.

Warren Buffett won’t be around forever. But, he has assembled a team of some of the best stock pickers and long-term investors in the market. For those looking for a company that’s laser-focused on returning capital to shareholders, Berkshire Hathaway remains a top pick.

Restaurant Brands (QSR)

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One of the most crash-resistant stocks in the market, Restaurant Brands International (NYSE:QSR) can be relied upon. The recent pullback in QSR stock (as well as a number of other fast food giants) looks like a potential buying opportunity. That’s mostly because of the defensive positioning of the Burger King and Tim Horton’s parent, relative to its peers.

Also, analysts continue to pound the table on this name, with TD Cowen recently reiterating its buy rating on the company, and a price target of $88 per share. Given the fact this stock is currently trading around $68, that’s some hefty implied upside. Strong franchise profitability, an expansion of cold beverage options at Tim Horton’s, and the host of value offerings provided by Burger King and the company’s other banners are reasons for this price target reiteration. I’m on the same page with this rationale, and the investment thesis here is easy to understand.

QSR’s diverse brand portfolio covering burgers, chicken, coffee and subs positions it well in the fast-food sector. Finally, it is supported by robust digital sales growth and efficient cost management.

Alimentation Couche-Tard (ANCTF)

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Founded over four decades ago, convenience store behemoth Alimentation Couche-Tard (OTCMKTS:ANCTF) didn’t get lots of attention. With over 16,000 stores globally, the company is stable, strong and profitable.

Also, the company’s business model is rather simple to understand. Currently, the company is consolidating the fragmented gas station and convenience store market. Worldwide, it is adding hundreds of new locations every year. And, it is revitalizing under-performing locations with the company’s high-performance brands.

Notably, the company recently expanded their deal with Too Good to Go. Both companies will expand 9,000 more Circle K and Couche-Tard stores in Europe and North America. This marks a big rollout milestone for the company.

As Couche-Tard continues to grow its revenue, profit and cash flows, investors stand to benefit over time with higher dividend distributions. Currently, this stock pays investors a dividend yield of just under 1%. It was much higher before the stock surged due to the market realizing the company’s strong forward growth potential.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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