This holiday season, instead of the types of gifts you would normally give to your grandchildren, you may instead want to think of stocks to buy for your grandchildren. Doing so could end up being the gift that keeps on giving, in more ways than one.
For starters, gifting your grandchildren stocks can be a great way to teach them about personal finance and investing. Knowledge about these topics from an early age could give them a leg up on their peers. It could even help to lay the foundation for financial success/prosperity in adulthood.
Second, besides imparting wisdom about building wealth, the stocks you buy for them today could actually create a tidy sum of wealth, decades down the road.
By purchasing high-quality stocks with strong earnings and dividend growth track records, you could help your grandchildren build a portfolio that could generate strong total returns over a long time frame.
So, what are some examples of top stocks to gift your grandchildren? Consider these seven, all of which fit well within the aforementioned criteria.
Automatic Data Processing (ADP)
A gift of Automatic Data Processing (NASDAQ:ADP) could teach your grandchildren the exciting silver lining of investing in high-quality “boring” stocks. This leading payroll processor and managed HR services provider has been a rewarding investment for long-term shareholders.
Over the past decade, ADP stock has gained by over 226%, beating the S&P 500 (NYSEARCA:SPY), which has gained by 151.25% during this same time frame. Sure, as the saying goes, past performance is not indicative of future returns. Gains over the coming decade may not meet/exceed the gains of the past decade.
Still, as I pointed out last month, earnings forecasts call for the company to report earnings growth of around 9% to 10% over the next few years. Coupled with ADP’s 2.43% dividend (which has grown by double-digits annually on average over the past five years), the potential for market-beating returns remains strong for ADP.
Broadcom (AVGO)
If you’re looking for AI stocks to buy for your grandchildren, Broadcom (NASDAQ:AVGO) may be a great choice, instead of other popular AI plays such as Nvidia (NASDAQ:NVDA) and Microsoft (NASDAQ:MSFT). But why Broadcom?
Following their strong performance during 2023, upside from the rise of generative AI and other artificial intelligence applications may already be well baked into the valuations of NVDA and MSFT. Although AVGO stock has gained considerably as well this year (67.26%), shares in this semiconductor and infrastructure software company may have much more future runway from this secular growth trend.
Recently closing on its long-awaited acquisition of VMware, Broadcom is now at work realizing billions in potential cost and growth synergies identified at the time of the merger announcement. This, combined with growing AI-related demand for chips and infrastructure software, may result in substantial share price growth for AVGO for many years.
Alphabet (GOOG, GOOGL)
Google and YouTube parent Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is not only one of the “fun” stocks your grandchildren may like. A blue-chip among tech stocks, the company’s flagship search advertising business gives it a deep competitive moat. Concerns that Google’s market share is dropping due to the rise of ChatGPT may be misplaced.
Speaking of AI, much like AVGO, GOOG stock has ample exposure to this trend. As Louis Navellier and the InvestorPlace Research Staff recently pointed out, Alphabet has made serious progress with its AI endeavors, and 2024 could even be the company’s “Year of AI.”
Between continued dominance in search advertising, further growth of its cloud computing unit, plus AI-related catalysts, the company could keep on growing at a moderately-high clip. In turn, leading to further rounds of manyfold gains for GOOG, gains for which your grandchildren will be thankful.
Lockheed Martin (LMT)
Lockheed Martin (NYSE:LMT) is a defense stock that is also a defensive stock, or a stock that produces steady earnings and pays out consistent dividends, no matter if the economy is booming or experiencing a downturn or recession.
Thanks to this resiliency, names like LMT stock can produce steady, satisfactory total returns. Shares have gained by more than threefold over the past decade. Similar to ADP, forecasts strongly suggest that LMT could keep on being a well-oiled compounding machine.
Rising global tensions bode well for Lockheed Martin’s long-term earnings growth. This in turn points to LMT continuing to increase its dividend (2.81% forward yield) by a high single-digit figure. Compounded total returns for this stock could result in a moderate gifting of shares today becoming worth a small fortune over time. With this, consider it one of the best stocks to buy for your grandchildren.
Mastercard (MA)
Some grandparents give their grandkids Mastercard (NYSE:MA) branded gift cards, but shares in this credit card processing giant, or in its main competitor Visa (NYSE:V) may be a far better gift to give.
What makes MA stock and V stock some of the best stocks to gift your grandchildren? Both stocks have performed well over the past decade, and above-average returns are very possible, thanks to one key trend. As I recently discussed, both Mastercard and Visa stand to benefit greatly from the switch from cash to digital payments.
Assuming this trend continues, leading to further earnings growth in the 15% to 20% range, shares in both companies are likely to continue climbing in tandem with this growth. Compounded over 10 years, 20 years, or perhaps even longer, investing in either or both stocks could enable your grandchildren to accrue a fair bit of wealth.
Roper Technologies (ROP)
Chances are your grandchildren aren’t familiar with Roper Technologies (NASDAQ:ROP), much less the company’s vast portfolio of subsidiaries that provide businesses with application software, network software, and technology-enabled products.
Nevertheless, consider “hiding in plain sight” ROP stock one of the best stocks to buy for your grandchildren. Many investors like Roper Technologies shares because of the stock’s “dividend aristocrat” status. To be a dividend aristocrat, you have to raise your dividend at least 25 years in a row. ROP has more than met this requirement. ROP’s dividend has increased 31 years in a row, with the latest hike representing a 10% increase.
However, while ROP’s small-but-growing dividend (0.56% forward yield) provides a small boost for total returns, what appears most appealing about Roper is its potential to keep compounding at an above-average clip, thanks to expected annualized earnings growth of just under 10%.
UnitedHealth Group (UNH)
UnitedHealth Group (NYSE:UNH) is yet another well-known stock that, due to long-term growth potential, may make for a great stock gift for your grandchildren. As I’ve pointed out before, UNH has strong potential to continue delivering earnings and dividend growth in the double-digits.
Admittedly, some may be skeptical that above-level growth will continue. Given the company’s current size and scope, I’ll concede that generating above-average levels of growth will be difficult. Yet while UNH stock is best known as being a health insurance stock, keep in mind that UnitedHealth Group has diversified into faster-growing segments of healthcare.
As InvestorPlace’s Will Ashworth recently pointed out, a good example of this is UNH’s continued expansion of its presence in the home health and hospice care market. Efforts like this, plus other moves like share repurchases, may go a long way in helping UNH to continue climbing at a double-digit clip.
On the date of publication, Thomas Niel 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.
