5 Ways to Think Like a Long Term Dividend Stock Investor

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5 Ways to Think Like a Long Term Dividend Stock Investor

4) What are business competitive advantages?

With companies like Wal-Mart Stores, the competitive advantage is the scale of operations. The company is spending a lot of time with suppliers in order to negotiate lowest prices, and it is continuously investing in infrastructure such as distribution centers and technology, in order to bring costs to the lowest levels possible.

On the other hand, Target stores are cleaner than those of Wal-Mart, and provide a more enjoyable experience to the shopper. This comes at a price however, as prices for the same item are usually slightly more expensive at Target. However, if you want to get fresher fruit and vegetables, do not want to wait in lines that have more than 2 customers, and want a better shopping experience, Target is the place for you. Target delivers on a great store experience and a product that is exciting and unique. Target tries to create excitement in shoppers, and position its products on basis of innovation, on design, and on quality.

If you are frugal like me, you would keep going to Wal-Mart to save a few bucks however. However, if you can afford to pay slightly more for a better and friendlier customer experience, faster checkout times, then Target is the place for you.

Customer loyalty is strengthened through the Red Card, which offers discounts to shoppers who frequent the store. It is a win-win for both customers and Target. Target also manages to keep customer loyalty with special discounts and deals from time to time.

Another item that appeals to some shoppers is the fact that Target is active in communities, and provides money to non-profits. Compare this to all the negative publicity that Wal-Mart gets for ruining mom and pop stores.

For companies like Exxon Mobil for example, their strength is in their integrated scale of operations. Furthermore, the company is very wise on capital allocation decisions, and tries to generate an adequate return on invested capital for all projects, whether drilling for oil and gas wells, making acquisitions or returning money to shareholders through buybacks. This is an important quality for management to have, because it lowers the risk that they would do something to jeopardize shareholder profits by getting in a bidding frenzy and replacing reserves by paying top dollars for it.

5) Can the business earn more over time – what factors will drive it?

The thing is that Target’s market is the US is close to its saturation point. Future growth in the US is still likely, but it won’t be as robust as in the past. Therefore, if it wants to generate more growth in the future, the company needs to expand internationally. The company is eyeing Canada and Latin America as its near term base for expansion. It actually seems to have not done so well with the launch of its Canadian operations, which has led investors to discount future growth prospects through a more skeptical lens. I believe that the company would learn from this experience, and hopefully use that in their future expansion plans abroad.

Full Disclosure: Long TGT, WMT, XOM, KO


Article printed from InvestorPlace Media, http://investorplace.com/2014/03/dividend-stocks-xom-tgt-wmt-ko/.

©2014 InvestorPlace Media, LLC

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