The Time Magazine named Donald Trump the Person of the Year for 2024, and you can bet that we are not done hearing about him. I’ve told you before that I’m not here to debate politics, and I don’t think politicians have a major impact on the stock market over a long period of time. However, they do make a lot of noise.
Trump is not in office yet and we have heard him say many times he will impose tariffs right, left and centers. All economic partners will face tariff increases if they don’t sit and negotiate “better terms” with the U.S. This is true for Canada, Mexico and also for China, and other countries.
I remember writing about “tariff wars” a few years back when Trump was in office. Tariffs will raise the price of goods and likely slow down the economy while raising inflation. The goal of this “tool” is to protect the U.S. economy by favoring in-country manufacturing and buying.
Unfortunately, it’s not that simple. Many goods or resources are found outside of the U.S., and that makes it more expensive to relocate manufacturers inside the United States. After a while, tariffs make a country’s economy inefficient as the cost of goods is inflated for no reason.
Should you worry?
That’s the question: how should one modify his portfolio to avoid getting hit by tariffs?
One could decide to get rid of all Canadian exporters such as Stella-Jones, Magna International and potentially Enbridge since the U.S. wants to produce its own oil? Then, that investor would also have to get rid of great companies like Apple and other tech companies making lots of their products in Asia before selling them to Americans.
Does that make sense? Not really, right? Let’s take a deep breath and take a look at what happened in 2016.
Surprise! Both the U.S. and Canadian markets were up between 2016 and 2020. We had tariffs and hard negotiations in place during that period. So how is it possible that companies did well despite such challenges?
That’s because companies adapt. Of course, you may have one or two companies that will fail to find solutions if customs charges them 25% more on their goods. But the best CEOs will find alternatives and solutions.
There will be a lot of volatility and noise, but I don’t intend to modify my portfolio to seek protections from tariffs.
In the end, Trump is a businessman who wants U.S. companies to make money. The stock market will be fine.
What’s next?
I started investing in 2003. Chances are you may have started before me. What is the most important lesson you can learn from your experience with Mr. Market? While the short-term view could be cloudy, scary, or pitch black, the long-term view often looks like this:
Imagine if I had stayed on the sidelines for 3 years after the tech bubble crash and 2 years after the World Trade Center tragedy. Imagine if I had quit during the financial crisis, the European debt crisis, the Brexit crisis, or COVID-19. I would have missed a magical 20 years in the market! When I look at this graph, I come to three conclusions:
- Obviously, always staying fully invested is the best solution.
- For several years, the market doesn’t give you much. This is where you test your patience, and you focus on your growing dividends to maintain the cap.
- If you retire today, you have enjoyed an amazing ride on the market. Therefore, you should be ahead of your plan. That’s why I project a return below 7% 😉.
To help you get ready for 2025, we have issued a complete podcast series on How to Invest in 2025.
Today, I share with you two stocks that are among my Top Picks for 2025. The selection methodology of those companies is explained in this article:
What a Dividend Growth Investor Buys in 2025?
MasterCard (MA)
Business model
Mastercard Incorporated is a technology company that connects consumers, financial institutions, merchants, governments and businesses worldwide, enabling them to use electronic forms of payment. It allows users to make payments by creating a range of payment solutions and services using its brands: MasterCard, Maestro and Cirrus. It enables a variety of payments capabilities (including products and value-added services and solutions) over its multi-rail network among account holders, merchants, financial institutions, businesses, governments and others, offering customers one partner for their payment needs.
What was the story?
I’m changing my pick from Visa to Mastercard to avoid lawsuit distractions. Visa will fight back against regulators about debit cards, and I don’t see this issue as a significant problem at this point (though it could evolve quickly!).
Mastercard and Visa have almost identical business models. They get transaction fees, and they don’t carry consumer debt on their balance sheet (they leave that to the banks issuing the cards). Mastercard is a money printing machine in a perfect duopoly. MA has also been very generous with its shareholders with massive dividend increases and ongoing share buyback programs. Finally, MA’s volume-driven business is a buffer against inflationary pressures and supply chain shortages.
UnitedHealth Group (UNH)
Business model
UnitedHealth Group is a healthcare company. It has two businesses, Optum and UnitedHealthcare. Optum serves the healthcare marketplace, including patients and consumers, payers, care providers, employers, governments, and life sciences companies. UnitedHealthcare offers a full range of health benefits designed to simplify the healthcare experience and make it more affordable for consumers to access care. UnitedHealthcare Employer & Individual serves consumers and employers, ranging from sole proprietorships to large, multi-site, national, and public sector employers. UnitedHealthcare Medicare & Retirement delivers health and well-being benefits to seniors and other Medicare-eligible consumers.
What was the story?
I’m going after an all-star dividend grower with an almost perfect dividend triangle. Keep in mind the EPS drop in 2024 was related to the cyberattack. The company will quickly resume its growth track. United Healthcare is the perfect example of a low-yield, high-dividend growth stock. UNH is the largest private health insurance provider in the U.S. What strikes us when we analyze UNH is its ability to constantly be one step ahead of its peers by pre-emptively adapting its business model to the industry and political happenings. They offer a one-stop shop for medical insurance, pharmacy benefits, and healthcare services. This helps their customers manage their healthcare costs more effectively than most alternatives. This is why their revenue and EPS have increased year after year without much fluctuation. The stock trades at a forward PE ratio of 20.15 while the 5-year average is 24.68.
Find out about 6 companies that will crush 2025
Each year, I compile a list of stocks expected to do better than the market for Dividend Stocks Rock members. This year, I’ve reviewed the 11 sectors for them and included top picks for each. I’ve decided to share six stock ideas in three different sectors.
You can download them right here:
