I'm up late looking over some investing papers at home, and I decided to do a side-by-side comparison contrasting a "good" business with a "great business" in response to a question I got on my personal blog.  Though some of the concepts - the difference between reported earnings per share and cash flow - are too advanced for this site, I realized there are a few key lessons that you can take away to help make better investing decisions.

 I wanted to expand on them in a beginner-friendly way to help those of you who are new to investing in stocks.

1. Invest In Stocks That Have Increased Their Dividend 25 Years In a Row

If you are going to buy individual common stocks, as opposed to an index fund, consider making a short list of only those businesses that have increased their dividend every single year for at least 25 years in a row.  This is a very difficult, almost draconian test, that will often encompass recessions, wars, inflation, deflation, and depressions.  Only the best of the best can keep up increasing payouts that long through such wildly varying environments.

2. Invest In Stocks That Have Earnings That Are Stable and Tend to Increase Over Time at a Rate Faster Than Inflation

A company with profits that regularly grow to the sky is better than one with wildly varying profits that fluctuate due to commodity-like economics.  You want to own companies that don't depend on the broader economy to survive.  You want enterprises that generate cash year in and year out; that sell more of whatever it is they sell; that people need.

 You want companies like Clorox, Procter & Gamble, Brown Forman, McCormick, Coca-Cola, PepsiCo, Unilever, and Colgate-Palmolive, just to name a few, as long as you can get them at reasonable valuations.  These businesses have done a magnificent job over many generations combating inflation because they are able to raise prices without much consumer pushback.

3. Invest In Stocks That Don't Rely on a Single Currency, Nation, or Product

Think of a firm like The Coca-Cola Company.  The planet consumes an estimated 166.44 trillion ounces of beverage every year.  The Coca-Cola Company's market share gives it 5.3184 trillion of those ounces, or 3.195% of all liquids consumed.

Looking at Coke's market share, 48% came from trademark Coca-Cola products (Coca-Cola, Diet Coke, Coke Zero, Vanilla Coke, Cherry Coke, etc.)  The other 52% came from soda, juice, water, coffee, and tea.  If you're at a sporting event and have a Powerade, Coke owns it.  If you are having a glass of Gold Peak ice tea with your lunch, Coke owns it.  If you have Minute Maid orange juice with your breakfast, Coke owns it.  Don't like Minute Maid and prefer Simply Orange juice instead?  Coke owns that, too.  If you grab a cup of Georgia brand coffee, Coke owns it.  If you reach for a Fanta or Sprite, Coke owns it.  Vitamin Water?  That's Coca-Cola.  From billion-dollar fruit juice companies in the Middle East to canned coffee in Japan, a majority of the cash that floods into Coke's coffers comes from things other than those bearing the Coca-Cola name on them.  In fact, it is practically impossible for a person to go through a year without putting some money in Coke's pocket; even those living in the remote reaches of civilization where there is no electricity. 

Last year, the firm sold $47,087,000,000 worth of product, generating $11,809,000,000 in pre-tax operating earnings ($3,526,000,000 of which came from the United States and $8,283,00,000 of which came from 200+ other countries using 81 different currencies).

It doesn't matter where you live, what currency you use, how old you are, or whether your village has electricity, Coca-Cola is thriving in your neighborhood, making a profit for its owners by providing little moments of joy that refresh you.  It's a wonderful thing, as one of its legendary former executives, Don Keough, might have said.

4. Invest In Shares of Companies That Don't Experience a Lot of Change

Technology is great.  Innovation is fantastic.  When it comes to your portfolio, you want stable profits.  That means firms that sell legendary goods and services that rarely change - the Cadbury bars or Toll House cookies of the world - should hold a special place in your heart.  While Bill Gates has said that the next Microsoft might be in a garage right now, ready to knock the software giant off its perch, it's a lot harder to take down a product that people have loved for centuries, that has a distribution chain that took billions of dollars to build, and that folks already prefer due to familiarity.  I don't have a clue if Apple or Google will be around in the year 2050, but I do know someone will be making money off Johnson & Johnson baby powder or Tide laundry detergent.  That truism has value for an investor putting together a long-term portfolio.