If you’re trying to build wealth for future generations, you shouldn’t be thinking about getting rich quick. It’s all about creating a portfolio of companies that are designed to last. In this regard, you should keep your old favorites. coca cola (NYSE: KO) and relatively young Chipotle Mexican Restaurant (NYSE: CMG) On your wish list, while Hormel Foods (NYSE: HRL) It might be worth adding them to your portfolio now. Here’s a quick look at each stock.
1. Coca-Cola is a giant company.
with Market value Coca-Cola is worth about $270 billion and is one of the largest consumer food companies in the world. The benefits to the company and its investors should not be underestimated. For starters, Coca-Cola’s business is based on a portfolio of iconic brands, including its namesake Coca-Cola. Moreover, the company has a global distribution network and the financial muscle to support its brands with advertising. It is large enough to buy its way into new products and categories over time.
The consumer staples sector is one of the sectors that Retailers Consumers and end consumers are seen as customers by companies like Coca-Cola. The advantages Coca-Cola generates from its size lures consumers into stores, which in turn drives stores to buy Coca-Cola products for sale. Smaller competitors who can’t compete often don’t get the same shelf space, effectively reinforcing Coca-Cola’s already dominant position. But if smaller competitors are about to innovate, well, they may end up with their hot new product and become part of Coca-Cola. These are the many reasons why Coca-Cola is the dividend king, with over 60 years of annual dividend increases. The dividend yield is around 3% today, which is much higher than the 1.3% offered by Coca-Cola. S&P 500 Index.
2. Chipotle Mexican Grill is established, but still growing.
Compared to a company like McDonald’sChipotle Mexican Grill is still a small company. But it has clearly established itself as a dominant force in the restaurant industry. In fact, the company’s fresh assembly-line format has been copied several times, including by a recent market favorite rewardChipotle has been so successful for so long that its stock has skyrocketed, prompting it to split its stock 50:1 to bring the price back to where ordinary people can buy it. The best news? Despite its already impressive growth, Chipotle is still showing signs of incredible strength.
For example, in the first quarter of 2024, the company’s total sales rose 14% year over year to $2.7 billion. For reference, McDonald’s first-quarter total revenue was nearly $6.2 billion, so there’s still plenty of room for future growth at Chipotle. But the really interesting number was Chipotle’s same-store sales, which came in at 7%. Half of that is pretty good, considering McDonald’s only managed to grow 1.9% in the quarter. What that tells you is that Chipotle is still benefiting from strong demand, allowing it to continue opening new restaurants for the foreseeable future. Chipotle is focused on investing for growth, so it doesn’t pay a dividend. But if you don’t mind that fact, it seems like the kind of stock you can pass on to the next generation for safekeeping. However, the stock is always expensive, so waiting for the market to dip could provide a better entry point.
3. Hormel’s dividend yield is historically high.
Like Coca-Cola, Hormel Foods is a dividend king. It has increased its annual dividend for 58 consecutive years. It’s not as big as Coca-Cola, but it owns a portfolio of industry-leading brands, including Spam and Planters, among many others. It’s also highly innovative, introducing “new” and “improved” products with great regularity. The words “new” and “improved” are especially powerful with consumers, which is one reason why retailers love working with Hormel. So why is the stock yielding near an all-time high of 3.7%?
The quick answer is a perfect storm. Hormel hasn’t been able to pass on price increases to consumers as well as its peers, margins have been squeezed by inflation, the bird flu has been particularly bad recently, sales in China have been slow to recover from Covid shutdowns, and the company bought the Planters brand just as the nuts category in the snacks sector was slowing. None of these problems alone would be a big deal. All five of these problems at the same time have investors worried that Hormel’s best days are behind it. However, given the company’s long and successful history, it seems reasonable to give management a chance. You’ll be well paid to wait for Hormel to recover and move on to better days.
One to buy, one to look at, one to watch.
Given the negative sentiment surrounding Hormel today, it looks like an attractive long-term buying opportunity. Coca-Cola isn’t exactly cheap, but it’s not overly expensive either. If you want to build a reliable income stream, you might want to take a closer look. Chipotle has the best growth prospects of the three, but investors are factoring in a lot of good news. If there’s a bear market and investors throw the baby out with the bathwater, as is often the case, you might want to jump on board.
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Robin Greg Brewer The Motley Fool has positions in Hormel Foods. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends Cava Group. The Motley Fool has Disclosure Policy.
3 Stocks That Can Create Sustainable Wealth for Future Generations Originally posted by The Motley Fool
