Stocks As Gifts For The 2023 Holidays

Since 2010, we have been suggesting some stock ideas for parents and grandparents to purchase on behalf of younger generations.

It all started when my son came home from school with some amazing pictures of a Sikorsky helicopter. He was very impressed! His math teacher’s husband at the time was an engineer at Sikorsky and visited Noah’s class to talk about his job. Noah thought it would be really cool to have a helicopter.

As I started to roll my eyes, I quickly realized that we could make the most of this event. I suggested to Noah that we may not be able to get a helicopter, but we should buy some stock in the company that makes the helicopter, United Technologies (this company was acquired by Raytheon, RTX).

In our article below we offer more on CAIM’s stock selections for gift giving.

‘Tis the season to begin thinking about what to get our kids for Christmas. And of all the gifts we normally give, how many actually have a permanent lifespan? Wouldn’t it be nice to be able to give our children, or our grandchildren, nieces and nephews something with a meaningful and permanent impact?

There are a couple of immediate, compelling reasons to consider this idea. Stocks as gifts for kids/young adults help to:

• Promote financial literacy.
• Establish future savings.

Why is promoting financial literacy important? Because one of the best gifts we can give the young people in our lives is the gift of financial independence–and it’s always best to start early as it sets a precedent. The key is repetition. Introducing kids to companies they can relate to and talk about throughout the year consistently reinforces the idea that they have a vested interest in that company.

Buying stocks for children is also a great opportunity to teach them about money on a practical level, sitting down with them at the end of the year and going over their own portfolio and noting the changes. They might not get it at first but as you repeat the scenario for 5, 7 or 10 years they will begin to understand.

At CAIM we believe there are 3 key elements to selecting stocks as investment gifts.

1. Choose a company that has products or growth themes your child can relate to. For example, Proctor & Gamble (PG) sells lots of everyday household items from toothpaste to batteries. And Artificial Intelligence is a theme the younger generation understands better than ours!

2. The company should have a history of paying dividends. Dividends should be reinvested as they are paid to buy more shares over time. Many of the companies we recommend have a history of increasing their dividend exponentially allowing the investor to buy more shares. This compounding effect can have a tremendous impact on the total return of the investment over time.

3. Buy companies that are attractively priced based upon the company’s fundamentals. We favor companies with low levels of debt, high levels of cash flow, and good growth relative to the multiple of earnings paid. These companies are better poised to withstand market downturns and have the financial flexibility to grow their business and their dividends.

CAIM’s Holiday List:
(prices as of 12/7/2023)

1. Oracle (ORCL, $112.96, 1.4% dividend yield). Oracle has had a nice move in 2023, but we think there are many more years of growth ahead. This software company increased its’ dividend this year by 25%. Its databases and related software are a key part of the support system for AI which is just getting started. ORCL is an inexpensive way to play the trend and get paid while you wait (dividend). It trades at a 30% discount to comparable companies.

2. Nextera Energy (NEE, $59.88, 3.1% dividend yield). Steady and superior growth (8-10%), and steady dividend increases (has averaged 10% per year). This is not your typical utility. NextEra has been thriving on the growing population of Florida and is the largest owner of renewable energy power generation assets in the US. They are the largest generator of wind and solar power. Despite superior growth, NEE sells at a discount to the S&P 500 and its’ 5-year average valuation.

3. International Business Machines (IBM, $160.14, 4.2% dividend yield). New management, restructuring (selling off low margin businesses, acquiring growth companies) and poised for growth. IBM is in the midst of transforming itself, and the results are starting to show in accelerating sales growth. There is lots of cash to continue to pay the dividend and grow the company at the same time.

Many of these companies offer dividend reinvestment plans (otherwise known as DRIPs) to buy the share directly through the company. Charles Schwab & Co. will open up a custodial account with as little as $100 and you can buy as little as 1 share. Please call with any questions about how to set up a plan or how to choose companies that are right for your child.

Enjoy the holiday season!

Catherine Avery is the founder of CAIM, an independent, 100% woman-owned investment management firm specializing in a low-volatility equity strategy that focuses on high-quality, dividend-paying stocks.