2 cheap shares I’ve bought to hold for 10 years!

I am not a trader but a long term investor. So I find cheap stocks in great companies and then add them to my portfolio with the intention of holding them for years.

In practice, changing circumstances can mean that sometimes I buy shares for the long term but end up selling them faster than I originally expected. However, here are some stocks I bought that I now plan to hold for ten years. We are both attractive at the moment.

Dunelm

Will people still be living in their homes ten years from now? Do they still want to decorate? The answer to both questions is yes, in my opinion.

So, if a company can enter this market in a different way than its competitors, it can be a profitable business model. That’s why I own a stock in a homeware retailer Dunelm (LSE: DNLM).

A unique design and service proposition, together with an efficient UK-focused operation that offers economies of scale, helps differentiate it from many competitors, in my view.

Sales difficulties

Despite that, the firm trades in a price-to-earnings ratio of 13. In thinking that makes these shares cheap. Admittedly, there is a risk that incomes could fall as consumers tighten their belts in a recession. Sales in the first quarter of Dunelm’s financial year are now 8% lower than a year earlier.

But the business has been consistently profitable, pays generous dividends and has a good track record of carefully managing its balance sheet. Net debt at the end of the last financial year was £24m.

Overall, I like Dunelm’s business model and current share price. Indeed, if I had the money to invest today, I would be happy to add more shares to my existing holdings.

apart

I also have shares in it British American Tobacco. I appreciate the great passive income stream I generate from company dividends.

But, arguably, competition apart (NYSE: MO) is even more rewarding, which is partly why I also own shares in the US tobacco giant. It yields 8.3%, compared to 6.6% offered at British American Tobacco.

I see the shares are quite cheap. The company has a market capitalization of $81 billion and, last year, its operating income was $12 billion. That doesn’t reflect expenses like interest and taxes, so net income is lower.

However, like British American, Altria is a cash-generating machine. Have the right to Marlboro brand and distribute it in the US market is a gold mine for the company.

In recent years, Altria plc’s dividend payout has been 8%. I keep it in the portfolio hoping to increase the dividend in the future. That can boost the results that have more juice.

future prospects

Will Altria’s financial success last? After all, the volume of cigarettes is decreasing. The company made a costly mistake in adapting its portfolio to future demand, as shown by the large write-downs it made in July vaping brand.

But long-term, as the volume of cigarettes declines, I expect them to remain high. Product debt also gives Altria pricing power, which can help it raise prices to try and offset declining volumes.