Short print is the latest wealth that is quickly attracting the attention of the investing community. Hedge funds that burn shortened popular stocks are tied together by small investors to cover their positions and drive stock prices in an exaggerated way. While some speculators quickly earned by pulling these operations in and out, others burned badly.
However, because you only live once, it does not make sense to bet everything on a stock trade that could end in financial ruin. That’s why we like to invest in companies that are likely to enrich investors in the long run. Three wealth creators who, according to our contributors, offer a much better risk / reward profile than the current craze for short-term stocks, are a global infrastructure giant Brookfield Infrastructure (NYSE: GDP)(NYSE: BIPC), nut Consolidated Edison (NYSE: ED), and garbage truck Waste compounds (NYSE: WCN).
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A long history of enriching investors
Matt DiLallo (Brookfield Infrastructure): Brookfield Infrastructure may not have the momentary upside point of a stock being caught in a short press in the crosshairs. However, the global infrastructure giant has done extraordinary work to enrich investors in the long run. Since its inception in early 2008, the company has generated an annual total return of 18%. This has absolutely destroyed the wider market than the S&P 500The annualized total return during that period is 10%. To put Brookfield’s returns in perspective, a $ 10,000 investment in founding it would be worth more than $ 80,000.
Increasing the company’s strong total returns over the years has been the ability to grow its cash flow dividend at above-average compound annual rates of 16% and 11% respectively. The strong growth rate was Brookfield’s strategy to acquire stable cash flowing infrastructure businesses, which it is gradually expanding through procurement and organic expansion projects. The company estimates that its built-in organic growth will only increase cash flow per share for an annual rate of 6 to 9%. Meanwhile, additional acquisitions could increase its profit by 1% to 5% each year. Those dual growth operators will provide the company with the fuel to continue its 3.8% –yield yield at an annual rate of 5% to 9% in the coming years. It is therefore highly likely that Brookfield will enrich its investors by beating the total returns of the market.
A slow and steady turtle
Reuben Gregg Brewer (Consolidated Edison): If you think of the current market problem of irrational exuberance, what better place to turn than a boring utility like Consolidated Edison. Con Ed’s business is centered around New York City and its surrounding areas, a densely populated region with a cultural appeal that few other places in the world can match. The global pandemic blunted this advantage today, but if history is a guideline, the Big Apple will eventually return to its former glory. Meanwhile, investors can pick up a return of 4.4%, which is close to the highest point of Con Ed’s recent historic series.
ED Dividend Yield Data by YCharts
What’s also exciting in a perverse way is that Con Ed’s business is highly regulated. The government must approve its spending and rate hike plans and in return gain a monopoly in the regions it serves. This limits growth, but it also means that its capital expenditure plans are fairly entrenched and will take place regardless of the turmoil in the stock market. At this stage, the utility industry plans to spend almost $ 4 billion a year over the next two years, which will support the projected growth base growth of about 5% per year.
Yes, Con Ed is a boring company, but that’s how this Aristocrat dividend succeeds in amalgamating annual dividend increases of 46 years. And does it really not sound good at a time when the market seems to be going on the deep side?
A surprisingly good share to own at all times
Neha Chamaria (waste compounds): As a long-term investor, you can pick risky stocks and prepare yourself for volatility, or you can play it safe and buy stocks that will grow even during difficult times. For example, what about a waste management inventory like Waste Connections? Wait, you may first want to see how this stock has performed over the past decade.
WCN data by YCharts
You would not expect a yawn-inducing stock to double more than five times in ten years, would you? This is where a resilient business model and constant dividend growth come into play. Waste compounds collect, dispose of and recycle waste, which is not affected by economic cycles. This, together with the company’s acquisition growth strategy, has ensured steady revenue and cash flow growth over the years.
2020, for example, was a challenging year for almost every business, as the COVID-19 pandemic caused shutdowns to come to a standstill. Yet Waste Connections’ revenue improved marginally by 0.5% during the nine months to September 30, 2020. Although impairment costs reached their highest point, adjusted net income decreased year-on-year by only about 4%.
More importantly, Waste Connections increased its quarterly dividend by 10.8% in October 2020, which was the tenth consecutive year of annual dividend increases.
With the impact of the pandemic on businesses expected to decline this year, I expect Waste Compounds to offer an encouraging outlook for 2021 when it announces its 2020 numbers in mid-February. Also note management’s capital expenditure plans, as acquisitions are likely to be a major value driver for the company. As earnings and cash flow grow, dividends will also increase, making Waste Connections a very good stock to buy and forget for years.