If you invest in a company, you are buying it for the long term, believing that management can steer it to success over years and even decades. That's different from speculators looking to take advantage of short-term price moves, which could be driven by little more than investor sentiment.
Here are three stocks that do things in unique ways that should set them apart from their peers for a very long time to come. And that could be very rewarding for you -- and your portfolio.
1. Going where the value lies
As far as real estate investment trusts (REITs) go, W.P. Carey's (NYSE:WPC) core net-lease business model is pretty common. Like many of its peers, it owns single-tenant properties where its lessees pay most of the assets' costs. It's a popular REIT model because it's generally pretty low risk. However, W.P. Carey takes this approach and does something more with it.
Image source: Getty Images.
For example, the REIT is highly opportunistic, looking to put money to work when and where it makes the most sense for investors. Many of its peers are laser-focused on just one or two property types, which limits their flexibility. W.P. Carey, on the other hand, spreads its portfolio across the industrial (25% of rents), warehouse (24%), office (21%), retail (17%), and self-storage sectors (5%) as well as its "other" category to round things out.
And it generates 37% of its rents from outside the United States, mostly from Europe (25% of rents), while most of its peers focus only on domestic properties. In other words, this incredibly diversified REIT can literally go just about anywhere at any time. And that gives it a sustainable competitive advantage.
Today the dividend yield is an attractive 5.3%, and has been increased every year since the REIT's 1998 initial public offering. It's worth a close look for investors seeking to maximize the income their portfolios generate.
2. A focus on brands and innovation
The next name up is food maker Hormel (NYSE:HRL). Although there's nothing materially different about the food the company offers, it is highly focused on the protein space. That specialization distinguishes it from more diversified food companies. Hormel also happens to own some of the most iconic protein brands around, including namesake Hormel, Spam, Skippy, and most recently its Planters products. All in, the company owns an impressive collection of brands that are No. 1 or No. 2 in their category and spread across the grocery store aisles.
However, the company doesn't stop there. It also has a direct selling force that offers protein products to the food-service industry. Basically, it sells prepared meats that restaurants can easily incorporate into their menus. And with Planters, the company is broadening its reach materially into the convenience space. That, by the way, should be a wonderful outlet for the company's strong product development skills. Indeed, the company has a long history of taking old brands and livening them up.
However, the proof is in the pudding. Hormel has increased its dividend annually for over five decades (it's an elite Dividend King), and the average annualized dividend growth rate of the past 10 years was an impressive 15%. That's an incredible combination for income investors.
HRL Dividend Yield data by YCharts
The best part? The yield, while modest at 2.3%, is actually historically high today. In other words, it looks like Hormel is on the sales rack despite its long track record of success.
3. Electricity is the future
The last name up, industrial giant Eaton Corp. (NYSE:ETN), is not cheap. Its 1.8% yield is at the low end of its historical yield range, suggesting that value-focused investors should probably pass it by for now. However, it has a unique focus that has served it well and will likely continue to do so for many years in the future: power management. While there are multiple pieces to that, the core focus is on helping customers work with electricity.
Roughly two-thirds of its top line comes from electrical products and services, split across North America and the rest of the world. The remainder of its business comes from the auto sector (its legacy business dating back to its founding over 100 years ago) and aerospace -- but again, both have a power management focus.
Notably, a few years ago Eaton started a division focused on electric vehicles. What's most interesting about this move is that the company didn't have to buy its way into this emerging business -- it simply brought together different skills it already had in its arsenal to internally form the new division.
That's how deep the company's bench is in the electric space. And it is increasingly clear that electricity, from cars to solar panels, is going to be the long-term future of power in the world. That should give Eaton an edge that will be hard for competitors to match, and makes it a great option for your investment wish list for the next big market downturn.
A distance from the pack
Long-term investors need to look for that special quality that separates a company from its peers. You could call it a sustainable competitive advantage, but sometimes it's more subtle than that. For example, Hormel doesn't make food any better than any other company, but it uses innovation, iconic brands, and a protein focus to excel. W.P. Carey applies a common lease structure to a globally diversified portfolio, allowing it to pivot in a way that less diversified competitors can't. And Eaton has material skills in power management, putting it in a strong position to fill the needs of the world's shifting energy demands. All three should be able to use these unique models to excel for decades to come.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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