Stocks Built to Last: Discovering Four Resilient Companies
No stock is absolutely immune to the ups and downs of the market, but some companies have shown a remarkable ability to thrive despite varying conditions. With an impressive history of total returns, strong returns on invested capital (ROIC), and consistent dividend growth, certain businesses truly stand the test of time. Among these are Costco Wholesale (NASDAQ: COST), Cintas (NASDAQ: CTAS), Rollins (NYSE: ROL), and Badger Meter (NYSE: BMI), all of which have seen substantial success over the years.
Since the year 2000, these companies have delivered total returns between 2,810% and over 12,100%. This impressive track record, along with their solid operational foundations, supports their high price-to-earnings (P/E) ratios, which are between 53 and 56—significantly above the S&P 500 average.
Let’s take a closer look at why these four stocks should be on your radar for potential investments, especially during market corrections, or as candidates for dollar-cost averaging (DCA).
1. Costco Wholesale: A Retail Powerhouse
Imagine if an investor bought $100 worth of Costco shares at its initial public offering (IPO) in 1985 and held onto them. That investment would now be worth over $150,000! Costco has grown into the world’s third-largest retailer, with 876 warehouses worldwide and approximately 134 million members.
Costco excels at efficiency, allowing it to offer products and services at competitive prices. It earns over $4.4 billion in annual membership fees, showcasing its appeal to budget-conscious shoppers. By carefully curating a bulk product assortment, Costco has built a major cost advantage, helping it maintain a strong market position.
The loyalty of Costco's customers is impressive—93% of members in the U.S. and Canada renew their memberships each year, reflecting deep brand loyalty. With a robust ROIC of 24%, Costco is expected to continue to perform well, especially as management plans to grow its warehouse count by 3% to 4% annually. Recent trends show sales, net income, and dividends increasing by 9%, 12%, and 13% each year, respectively.
2. Cintas: The Essential Supplier
Cintas provides specialized solutions that various businesses need, including uniforms and safety gear. While the products might seem routine, the reality is that Cintas has become a stunning 1,250-bagger since its 1983 IPO.
With a history of rising sales and adjusted earnings per share (EPS) in 52 out of the last 54 years, Cintas exemplifies resilience. About 70% of its sales come from service sector clients, showcasing a diverse customer base that spans over 1 million clients. Given that there are more than 15 million businesses in North America yet to utilize its services, there's significant room for growth.
Cintas demonstrates strong growth, with annual increases in sales, net income, and dividends at 9%, 19%, and 27% over the last decade. Its solid ROIC of 24% adds further confidence in the potential for future dividend growth.
3. Rollins: A Leader in Pest Control
With about 13,000% in total returns since 1989, Rollins has shown remarkable performance, outpacing the S&P 500 by over four times in the same timeframe. As North America’s leading pest control service, Rollins has adapted well to various economic climates.
While other companies faltered during the 2008 financial crisis and later economic downturns, Rollins maintained steady sales growth, with increases of 6% and 12% during those tough times. Their successful mergers and acquisitions strategy aids in integrating smaller companies from the fragmented pest control industry, supported by an impressive ROIC of 30%.
With annual growth rates of 9%, 14%, and 15% in sales, net income, and dividends, Rollins is an appealing choice for investors interested in establishing a position during price drops or gradually adding shares.
4. Badger Meter: Pioneering Water Solutions
Leading the charge in the water solutions space, Badger Meter has delivered total returns that surpass 43,000% since 1972. The company’s future looks bright, especially with its BlueEdge suite, which combines advanced technology and services for effective water management.
Shaking up the water industry with innovative metering infrastructure, Badger Meter enhances connectivity for utilities, aligning with modern compliance standards and the rising focus on water conservation. This emphasis on smart technology not only drives revenue but also improves profitability due to higher margins associated with these advanced products.
In 2024, Badger Meter reported sales and EPS growth of 23% and 49%, respectively, indicating a strong trajectory for future growth. In the coming years, this company could emerge as a significant player in the dividend arena, potentially earning the title of Dividend King by 2043.
Frequently Asked Questions
1. What makes Costco Wholesale a strong investment?
Costco's significant growth, loyal customer base, and consistent increases in dividends make it a compelling long-term investment option.
2. How is Cintas positioned in its industry?
Cintas serves a wide array of over 1 million customers from diverse sectors, highlighting its strength and potential for growth in a fragmented market.
3. Why should investors consider Rollins?
With solid returns, a strong mergers and acquisitions strategy, and reliable annual growth, Rollins presents itself as a dependable choice for investors seeking stability.
4. What distinguishes Badger Meter in the water solutions market?
Badger Meter's innovative approach to technology and commitment to smart water management solutions position it favorably for future growth and profitability.
5. How resilient are these companies during tough economic times?
All four companies have demonstrated resilience in past economic downturns, consistently maintaining growth and strong customer demand despite external challenges.
