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2 'boring' stocks that easily beat the market - and may continue to do so


Just because a business isn’t new and exciting doesn’t mean it isn’t capable of generating above-market returns. In fact, some of the best performing stocks of the past few decades have come from sectors that many investors consider boring. Here are two designed for stable cash flow and steady growth that have generated massive returns for their early investors.

Built for stability and growth

I called Real estate income (O 1.09%) the best all-round dividend stock on the market. And while that’s high praise, I certainly think there’s a solid argument to support that claim.

If you’re unfamiliar, Realty Income is a real estate investment trust, or REIT (pronounced “reet”), that specializes in single-tenant properties, primarily occupied by commercial tenants. But don’t let the word “retail” scare you off.

Most of Realty Income’s tenants are high-quality businesses whose businesses are recession-proof and not easily disrupted by e-commerce. Think pharmacies, dollar stores, warehouse clubs, and convenience stores, to name a few. Additionally, Realty Income has significant portfolios of industrial and agricultural properties, and it recently jumped headfirst into the gambling real estate space with its acquisition of Encore Boston Harbor.

Not only are Realty Income’s more than 11,000 properties predominantly occupied by strong tenants, but these tenants also sign long-term net leases with initial terms of a decade or more and built-in annual rent increases. All Realty Income needs to do is put a tenant in place, and Income takes care of itself.

It’s a pretty boring business, sure, but its performance hasn’t been. Since listing on the NYSE in 1994, Realty Income has offered investors market-beating annualized returns of 14.4%. So a $25,000 investment would have grown to more than $1.2 million in less than 30 years — and with a business model that lets investors sleep well at night.

An industry leader in a surprisingly exciting market

If I were to ask you what type of commercial real estate stocks have performed best during the COVID-19 pandemic, you might guess one of the tech-focused types, like data centers, or the related industrial real estate space. to e-commerce. But the answer is that no real estate sub-sector has done better than self-storage. People needed to move to make room for their new home offices and decided to declutter their homes because they were spending more time there — large catalysts for the self-storage industry.

With regard to self-storage real estate operators, public storage (PSA 2.02%) is in a class of its own. The company has more than 2,800 facilities with 202 million leasable square feet and is one of the few REITs with an A credit rating. Since 2004, Public Storage’s same store net operating income (NOI) has increased by more than double the average property operator’s rate, and it has significantly higher margins than any of its major peers.

While it’s the biggest player in its space, don’t make the mistake of thinking Public Storage has maxed out. The portfolio has grown by 26% since 2019 through a combination of acquisitions and developments. And with a rock-solid balance sheet, there’s a ton of room to continue growing in the years to come.

The self-storage market may be cooling down a bit now that the COVID-19-related storage surge is largely over, but long-term fundamentals are strong. With the stock more than 30% below its 52-week high and an attractive yield of 2.9%, Public Storage deserves a closer look now.

As far as business goes, it doesn’t get much more boring than self-storage facilities. But consider these returns. Since 1990, Public Storage has delivered a staggering 11,090% total return – and that’s after the recent setback.

Buy for the long term

On the one hand, when I say that these stocks should produce excellent returns, I am referring to the long term. I have no idea what they are going to do over the next few weeks or months. As we saw in 2022, both can be a bit volatile over short periods. And while excellent past performance is no guarantee of future results, there’s no reason to believe they can’t continue to generate excellent total returns for years to come.



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