7 Smart Stocks to Buy for Your Children's Portfolio (2024)

For more than one reason, you may be interested in figuring out the best stocks to buy for your children. On one hand, you may be interested in teaching your kids the lifelong benefits of investing in stocks.

Based on historical returns, equities have been the best vehicle for everyday individuals to build and hold on to wealth. Alongside important lessons on personal finance, there may, of course, also be a financial motivation for building a stock portfolio for your children.

Future returns from investments today could provide prosperity for your family down the road. Over a longer time frame, it could also result in providing them with generational wealth that better enables them to pursue their dreams and passions.

Hence, it may be best to focus on stocks that offer the right mix of value, growth, and stability. Taking a look at major names across all sectors, these seven stocks to buy for children will meet these criteria.

Walt Disney (DIS)

It’s no surprise that Walt Disney (NYSE:DIS) is one of the stocks parents buy for their children. As the adage goes, “invest in what you know,” and Disney is of course well known among children across the world.

However, besides being a familiar and perhaps even “fun” investment, buying DIS stock today could prove very profitable going forward. Irrespective of who wins a current proxy fight between management and outside shareholders, including activist investor Nelson Peltz’s Trian Partners, a Disney comeback may be taking shape.

At least, based on recent comments from CEO Bob Iger suggesting that the company’s transition into a streaming-focused entertainment company is starting to pay off.

Thanks to both streaming growth and cost-cutting measures, sell-side forecasts call for Disney’s profitability to steadily rise between now and 2026. This in turn may enable shares, already trending higher, to keep surging towards their prior all-time high.

Lowe’s (LOW)

Your kids may complain about taking a trip to the local Lowe’s (NYSE:LOW) home improvement store location to buy something for the house, but if you make the retailer’s shares one of the stocks to buy for your children, they may one day thank you for it.

That’s not to say that LOW stock is some sort of “get rich” opportunity. This “dividend king,” with 60 years of consecutive dividend growth under its belt, is more of a slow-and-steady wealth-building opportunity. However, these steady gains could add up over time.

Beyond just LOW’s 1.82% dividend, which has increased by an average of 18.65% annually over the past five years, as I have argued previously, Lowe’s is poised to experience strong earnings per share growth, due to the company’s aggressive share repurchase efforts. In turn, the stock should steadily rise in tandem with this EPS growth.

Realty Income (O)

Realty Income (NYSE:O) may not be a familiar name to your kids, but the real estate investment trust could be a great long-term “buy and hold” opportunity at current prices.

The reasons for this are twofold. First, O stock is one of the top monthly dividend stocks. Because high interest rates held them down, shares currently yield a solid 5.82%.

This REIT is a dividend aristocrat, and has been consistently raising its payout for the past 26 years. Second, related to the current high interest rate environment, is the solid capital growth potential with Realty Income stock.

Although many factors will play a role, including the success of the REIT’s recently-completed merger with Spirit Realty Capital, once the Federal Reserve lowers interest rates back towards pre-hike levels, O, like other interest rate-sensitive REIT stocks, will likely experience a big rebound in price.

O’Reilly Automotive (ORLY)

Based on performance, O’Reilly Automotive (NASDAQ:ORLY) has been one of the stocks to buy for your children.

Over the past decade, shares in the auto parts retailer have gained by 633.66%, outpacing the S&P 500’s 177.1% gain during this same time frame.

Yes, past performance is not indicative of future results. Future returns for ORLY stock may be modest by comparison.

Still, these gains could still beat the market. Three factors point to the company continuing to meet analyst expectations of double-digit earnings growth for years to come.

First, high automobile prices continue to incentivize motorists to maintain existing vehicles, driving aftermarket auto part demand.

Second, as a Seeking Alpha commentator recently discussed, O’Reilly’s expansion into Canada and Mexico could help sustain store growth.

Third, as InvestorPlace’s Rick Orford pointed out late last year, ORLY’s share repurchase program stands to provide a continued boost to EPS.

Texas Roadhouse (TXRH)

Texas Roadhouse (NASDAQ:TXRH) has been a successful long-term growth investment, and could maintain this status going forward.

The Louisville, Kentucky based casual dining restaurant operator and franchisor’s revenue and earnings keep going up.

This is due to both same-store sales growth and the opening of new locations. That’s not all. Besides having strong continued earnings growth prospects, there is also strong dividend growth potential with TXRH stock as well.

As I have noted in past coverage, the company’s dividend has increased by double-digits annually on average over the past five years.

Texas Roadhouse most recently increased its dividend earlier this year. The company raised its quarterly dividend by nearly 11%, to 61 cents per share.

Texas Roadhouse may not be a high-yielder right now (forward yield of 1.64%), but over time, further dividend increases could result in a substantially higher yield on costs for investors buying TXRH today.

UnitedHealth Group (UNH)

Time in the market beats out timing the market. That investing principle holds true with stocks to buy for your children. However, if you decide to buy UnitedHealth Group (NYSE:UNH) for your kid’s portfolio, timing may be on your side.

Why? As I recently argued, two temporary hiccups have pushed UNH stock to a relatively low valuation (17.2 times forward earnings).

Once these relatively small issues clear up, shares in the health insurance and healthcare services giant could bounce back strongly. Mostly, this is because of investors re-rating the stock back to its pre-pullback valuation, which is 20-25 times forward earnings.

A re-rating could result in shares rising between 16.3% and 45.4% above current prices. Demographic trends and UnitedHealth’s expansion into healthcare sectors may boost UNH’s long-term earnings and dividend growth.

Visa (V)

Visa (NYSE:V) may be a familiar brand among your children, but the key reason to make shares in this payment technology company a part of their portfolio has more to do with its outstanding long-term growth prospects.

Namely, Visa, as well as its main competitor, Mastercard (NYSE:MA), are likely to continue experiencing high organic growth, as what remains of global spending transacted in physical cash ($7 trillion annually) continues shifting towards cashless methods like cards and digital payments.

While the valuation of V stock (28.2 times forward earnings) clearly takes this strong growth catalyst into account, shares could maintain this premium valuation, and continue rising in line with increased earnings growth.

Sell side forecasts call for Visa’s earnings to grow by 21.2% this year. This level of earnings growth will also likely enable Visa to maintain its 15-year track record of double-digit annualized dividend growth.

On the date of publication, Thomas Niel did not hold (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.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.