Interestingly, six of the eight (ADM and SYY are the exception) make their money from branded consumer food and beverages products. If you are looking for a slow changing businesses that grow year after year, branded food companies are a good place to search.
What happens when you eat too much unhealthy branded food and beverage products?
You need health care.
The health care industry will continue to grow as global populations rise and age. Growing prosperity means more income can (and will) be spent onhealth.
The following companies are Dividend Aristocrats whose revenue is generates primarily in the health care sector:
– Cardinal Health (CAH)
– Becton Dickinson (BDX)
– Johnson & Johnson (JNJ)
Not to be outdone by the food and beverage industry (or perhaps due to negative health effects from the food and beverage industry) the health care sector counts 9 Dividend Aristocrats in its ranks.
They operate in more diverse lines of business than the food companies.
HCP, Inc. is a REIT that focuses on health care properties.
C.R. Bard, Medtronic, and Becton Dickinson manufacture and distribute health care devices and supplies.
Abbott Laboratories and Johnson & Johnson (and to a lesser extent, Cardinal Health) are well diversified health care businesses.
AbbVie was recently spun-off from Abbott Laboratories (notice the vaguely similar names), and is a pharmaceutical company.
There has been much debate about the role of insurance in health care in the United States over the last decade.
The insurance industry is among the slowest changing of any industry.
Big data and cheap information has not reduced the earnings power of insurance companies.
Technology enhances insurance, as it allows actuaries to more precisely determine risks. The following companies are in the insurance industry and are Dividend Aristocrats:
The reason there are only 2 insurance companies that are Dividend Aristocrats is not because the insurance industry has gone through tremendous changes.
Rather, the insurance industry is highly competitive. It takes an exceptionally well run business to outmaneuver its competitors in the insurance industry. The two companies above have done just that for more than 25 years.
The advantage of investing in businesses from slow changing industries is that you can sit back and watch your investment grow over time. You do not have to constantly check and make sure the business in which you have invested in has not faltered.
Great businesses in slow changing industries can compound wealth at above market rates for decades at a time.
Great businesses in mediocre industries will eventually succumb to the competitive forces and poor economics of their respective fields.
Poor businesses in great industries are pushed out of business by great businesses.
Finally, poor businesses in poor industries make generally terrible long-term investments.
Identifying which industries offer the best chance of long-term outperformance can increase your odds of generating above average stock returns.
