My Money Is on This Dividend Stock With Huge Tailwinds

Last summer, I took a giant leap of faith. Instead of suggesting where to invest and then never revisiting my original thesis, I pledged to put my own money behind 10 stocks. My goal was to build the World's Greatest Retirement Portfolio. Almost one year through, and the portfolio is dominating the S&P 500 -- outperforming the index by 18 percentage points!

Today, I'm happy to state that after almost a year, I'm just as bullish on one of those 10 -- Whole Foods Market (Nasdaq: WFM  ) -- as I was a year ago. I'll show you how my pick has performed, why I'm still bullish, and what I see moving forward for the company. At the end, I'll offer you access to a special free report that has three more ideas for the perfect retirement portfolio.

Revisiting my thesis
My interest in Whole Foods was originally piqued for two key reasons. First, everyone needs food, so there's some level of safety investing with a company that provides it. But the second reason -- the rise of the importance of organic food -- is what separates Whole Foods from competitors like Safeway (NYSE: SWY  ) , Kroger (NYSE: KR  ) , and Osco/Jewel parent SUPERVALU (NYSE: SVU  ) . While all three of these companies have P/E ratios lower than Whole Foods, they don't have the same growth potential or impressive margins.

Year

Total Food Sales

Organic Food Sales

Organic Penetration

2000  $498,380  $6,100 1.2%
2002  $530,612  $8,635 1.6%
2004  $544,141  $12,002 2.2%
2006  $598,136  $17,221 2.9%
2008  $659,012  $23,607 3.6%
2010  $673,324  $26,708 4%
       
Annual Growth Average 3.05% 15.9%  

Source: Organic Trade Association. All numbers in millions.

With just 4% of all purchased food being organic, there is enormous potential for healthy eating to get a bigger slice of the pie.

Given these industrywide statistics, Whole Foods served up the type of results one would expect. Take a look at how revenue, income, and comparable-store sales have grown since I recommended buying the stock.

Reporting Period

Revenue Growth

Income Growth

Comparable-Store Sales Growth

Q2 2011  10.9% 34.7%   8.4%
Q3 2011  12.3% 31.3%   8.7%
Q4 2011  12.9% 33.4%   8.7%
Q1 2012  13.6% 30.9%   9.5%

Source: Company earnings releases.

Numbers like these are virtually unheard of in the grocery industry. Only newcomer The Fresh Market (Nasdaq: TFM  ) has the potential to put up similar figures, and it's more expensive than Whole Foods.

Perhaps the most important number is the comparable-store sales growth, as it indicates that the company is growing revenues by driving traffic -- rather than just by opening up more new stores (more on that in a moment).

As you might have guessed, this has led to impressive performance since last year. Had you invested $4,000 in Whole Foods, you'd be sitting on gains of about $1,400 -- whereas an investment in the S&P 500 would have actually lost money.

WFM Chart

WFM data by YCharts

Why I'm still bullish
I think the information I've provided here offers more than enough reason to be bullish on Whole Foods, but the company has further characteristics I find promising. I fully believe that education is the key to pushing the company's message of healthful organic foods forward. Whole Foods already has a program in place to rate the sustainability of its seafood products, and starting in 2013, the company will be launching a "Health Starts Here" campaign that rates the healthiness of various foods on a scale of 1 to 5.

On top of that, the company still has lots of room for growth. Co-CEO John Mackey has stated several times he believes the company can grow to 1,000 stores domestically; today the company is just approaching one-third of that level.

It doesn't hurt that the company also offers up a small dividend -- which I believe will grow substantially as the company comes closer to its goal of 1,000 stores.

A solid bet for your retirement
You know where I'm putting my money, but if you want further investment ideas for your retirement portfolio, I suggest you check out our latest special free report: "3 Stocks That Will Help You Retire Rich." Inside, you'll get the names of three stalwart business that promise to be dominating their fields -- and rewarding shareholders -- for years to come. Get your copy of the report today, absolutely free!

Fool contributor Brian Stoffel owns shares of Whole Foods. You can follow him on Twitter, where he goes by TMFStoffel. The Motley Fool owns shares of SUPERVALU and Whole Foods Market. Motley Fool newsletter services have recommended buying shares of Whole Foods Market and The Fresh Market, and buying calls on SUPERVALU. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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