There are many ways to make history in the business world. Some companies report all-time record sales and profits, others build unbeatable dividend histories, and a few settle for simply rewriting the rules for consumers and other businesses. All of these revolutionary acts are clear signs of a successful business, and investors flock to these names for good reasons, so we asked three of our top analysts to share their favorite game-changing stocks. Read on to see why our writers chose to highlight American Express Company (NYSE:AXP), Amazon.com (NASDAQ:AMZN), and American States Water (NYSE:AWR).
This stock won't leave you high and dry
Dan Caplinger (American States Water): Most investors don't follow the water-utilities industry, but the sector has produced reliable returns and lucrative dividends for decades. American States Water acquired its first water-utility systems in 1929, but the company has grown dramatically, providing water service to areas across the state of California, as well as to select military base locations in seven other states. The California drought has created some short-term difficulties for the water utility, but some improvement in drought conditions more recently could spell much-needed relief from a tough environment.
American States Water has made history because it currently sports the longest streak of consecutive annual dividend increases in the market. For 62 years, the water utility has rewarded its shareholders with rising payouts every year. Moreover, those increases haven't merely been symbolic, as the utility's 8% dividend hike in November was quite a bit more than many of its peers.
With a current yield of 2%, American States Water isn't the highest-yielding dividend stock in the water-utility industry, but no one can sport a longer-lived commitment to returning capital to shareholders. Putting investors first is how American States Water has made history, and it hopes to keep doing so year after year in the future.
You can make history without setting records, too
Anders Bylund (Amazon.com): I can't say that Amazon.com is setting any world records right now. It isn't the largest retailer on the market, it's not the most profitable business by a long shot, and you can't set dividend records without paying dividends. But I still think it's fair to say that Amazon in making history in many ways.
The company's e-commerce platform started out as a small player in a huge traditional retail market, and was easily ignored for a long time. Now, mall stores and many other brick-and-mortar retail chains are fighting for their very lives against the e-commerce army -- with Amazon leading the charge. That's disruption on a massive scale, and the American consumer experience is changing at its very core.
But that's not all. Amazon also leads the way in the exploding market for cloud-computing services. Amazon Web Services, or AWS for short, was one of the first cloud-computing solutions on the market, and it's still the largest and most successful cloud platform available. And it's very much a real business. At latest count, AWS accounted for 10% of Amazon's quarterly sales and a staggering 89% of the company's total operating profits. That's another game-changing operation, reshaping the way other companies do business, and how consumers can interact with them.
Amazon might not be making history by the numbers, at least not yet. That doesn't stop the company from making unforgettable waves across the global business landscape. My daughter is only 11, and she already knows that Amazon is changing the world. I'll just have to fill her in on how big the changes really are.
Let Amazon first rewrite the rule books for doing business. World-record profits should follow later.
Helping travelers pay for things for more than a century
Jason Hall (American Express Company): Starting as an express mail company in 1850, American Express didn't get into the financial-services business until the early 1880s after one of its founders, J.C. Fargo, found it nearly impossible to access cash while traveling in Europe. This would eventually lead to the American Express Travelers Cheque, which would quickly gain acceptance in much of the civilized world and establish the company as a truly international financial-services company. The Travelers Cheques would become a key part of the company's success for decades, and are still popular for vacationers around the world.
In 1958, more than a century after its founding, American Express would make history again with the launch of its most well-known product, The American Express charge card. And while AmEx wasn't the first -- the Diner's Club card had been around since 1950 -- it quickly gained in popularity, and has remained one of the most popular charge and credit cards around the world.
It's also a company that investors should consider buying today. Shares are down 16% from their all-time high in 2014 as the company has worked through some challenges. But it has remained very profitable, and it's pretty cheap trading for less than 15 times trailing earnings. But here's the big one: With global middle-class growth set to continue for years -- corresponding with the spread of mobile computing that is driving growth in electronic payments -- American Express is still a great long-term growth investment.
Anders Bylund owns shares of Amazon. Dan Caplinger has no position in any stocks mentioned. Jason Hall owns shares of Amazon and American Express. The Motley Fool owns shares of and recommends Amazon. The Motley Fool also recommends American Express. The Motley Fool has a disclosure policy.