3 Magnificent Stocks I “Never” Sell.

The idea behind successful long-term investing is simple: Only own a portfolio of growth stocks that can produce consistent increases in revenue and net income. Over time, the steady growth of the business will result in a higher share price, providing investors with attractive capital gains.

A bonus is that dividend-paying companies that enjoy better business fundamentals will also end up increasing their dividends along the way, allowing investors to enjoy the best of both worlds.

These are the types of companies I will hold for years or even decades because they can help bring in my money.

Of course, it is important to identify companies with attractive characteristics that are worth owning for the long term. These businesses should have a strong competitive moat and be dominant players in their respective industries. They should also show healthy top and bottom line growth for several years and consistently generate free cash flow.

With these characteristics in mind, here’s a trio of stocks I own that I never intend to sell.

Image source: Getty Images.

1. MasterCard

MasterCard (ME 1.35%) is a payment processing company with a total of approximately 3.4 billion debit and credit cards issued worldwide. The business is one of two dominant payment companies in the world, the other being Visaand had a 27.4% market share in the US in 2022, up from the five-year average of 22%, according to the Nilson report.

Mastercard boasts a strong financial position, with revenues growing from $18.9 billion in 2021 to $25.1 billion in 2023. Net income increased from $8.7 billion to $11.2 billion in same period, and the business is also very free cash flow-generating, averaging $9.9 billion. produced over the three years. Mastercard also raised its quarterly dividend by 16% year-over-year to $0.66 at the end of last year, marking more than a decade of consecutive dividend increases.

The strong performance continued in the first half of 2024. Mastercard’s revenue rose 10% year-over-year to $13.3 billion, while net income rose 20.4% year-over-year to 6, 3 billion USD. The good results were attributed to robust consumer spending and a rebound in tourism that led to cross-border transaction volume growing 17% year-on-year for the second quarter of 2024. Free cash flow was 4.1 billion dollars, up 2.6% year-on-year. $4 billion in the previous comparative period.

With Mastercard’s solid reputation and track record, I am confident that the business can continue to grow steadily over the years, while increasing its dividend along the way.

2. The alphabet

Alphabet (GOOGL -0.89%) (GOOG -0.92%) is the parent company of Google and enjoys a dominant market share in the Internet search space with Google Search. The company also offers a cloud service (Google Cloud) and owns the video sharing site YouTube. I like the company for its strong market share in internet search, allowing it to serve targeted ads from its customers.

Alphabet boasts solid financial numbers, with growth in both its top and bottom lines. Revenue increased from $257.6 billion in 2021 to $307.4 billion in 2023, while operating income increased from $78.7 billion to $84.3 billion over the same period. Net income was affected by one-off adjustments such as gains and losses on equity and debt securities, but otherwise would have grown steadily over the three years. The business also generated average positive free cash flow of $65 billion each year.

Alphabet’s strong performance continued in the first half of 2024. Revenue rose 14.5% year-over-year to $165.3 billion, while net income rose 41.5% year-over-year to USD 47.3 billion. The company continued to produce free cash flow of $30.3 billion for the half year and recently announced its first quarterly dividend of $0.20 per share.

There could be more from Alphabet as it unleashed Gemini last December, its most advanced artificial intelligence (AI) model yet. The new model is capable of more sophisticated reasoning and can better understand and analyze information, thus providing superior search results. In May, the company updated Gemini with new features, and this generative AI trend could propel the company’s revenue and cash flow higher over time.

While investors may be concerned about the significant sums Alphabet has to spend on research and development, I believe the company is well-positioned to harness the power of generative AI, incorporate it into its products and services, and ultimately monetize it to help the business grow and improve customer loyalty.

3. Adobe

Adobe (ADBE 1.50%) is a software-as-a-service company that operates platforms for users to manipulate photos, design web pages, and edit videos and graphics, among other things. The company is also famous for its Portable Document Format (PDF), which has been widely used around the world for all forms of documentation.

Adobe’s financials show that the business is doing well and growing steadily. Total revenue rose from $15.8 billion in fiscal 2021 to $19.4 billion in fiscal 2023, with net income rising from $4.8 billion to $5.4 billion over the period. Like Alphabet and Mastercard, Adobe is also adept at generating free cash flow, with average free cash flow of $7.1 billion over 2021-2023.

The business continued to grow, with revenue reaching a new record in the second quarter of this fiscal year. For the first half of fiscal 2024 (ended May 31), revenue rose 10.8% year over year to $10.5 billion. Operating income and net income were down year-over-year due to a $1 billion acquisition termination charge for Figma, but would have increased 18.1% and 25.6%, respectively, year-over-year year, if this tax had been excluded. Free cash flow was healthy at $3 billion for the most recent six-month period.

Adobe has also jumped on the generative AI train with the release of its AI-powered assistant, Adobe Firefly. The latest versions of Illustrator and Photoshop incorporate Firefly features that help users save time and allow designers and creators to use the tools to create unique designs and make complex edits. Such features should increase the platform’s appeal to users and help Adobe attract more subscribers to its software.

Elsewhere, Firefly has also been incorporated into Adobe’s business-to-business (B2B) journey optimization tool to personalize experiences for buying groups that are responsible for major purchasing decisions. This feature helps famous brands like Accenture, IBMand Microsoft in coordinating and organizing transactions to obtain information. Generative AI has the potential to introduce many more features into Adobe products to help its customers, making them stick around and spend more in the future. These features also increase the appeal of Adobe’s platform to new customers. The company has good potential for further growth and I believe it can continue to see its net income and free cash flow grow over time.