If you're like me, you don't really care what your stocks do over the next few months, or even over the next few years. In fact, I'd love it if some of my stocks went down in the short term so that I could buy more.
If you have a long-term investing mentality like this, here's why you should take a closer look at Realty Income (O 0.47%), Square (SQ 3.09%), and HCP (DOC 2.37%). I own all three stocks -- not because I expect them to make me rich tomorrow, but because they have some serious growth potential over the next few decades.
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Steady income and incredible total return potential
Real estate investment trust Realty Income was built to generate consistent strong returns, and that's exactly what it's done. In the 24 years since its NYSE listing, Realty Income has increased its monthly dividend 98 times and has produced 15.8% annualized total returns.
There are two main reasons for this. For one, the company invests in properties occupied by tenants that have little to worry about from recessions, or from the e-commerce headwinds that are wreaking havoc in many areas of retail. Just to name a couple of examples from Realty Income's top tenants, Walgreens (NASDAQ: WBA) sells things people need in good times and bad. Walmart (NYSE: WMT) offers bargains that online retailers have a tough time matching, and its low prices actually tend to help during recessions.
Second, the company's net lease structure ensures a consistently rising income stream. If you're not familiar, a net lease requires the tenant to cover most variable expenses of property ownership, particularly taxes, insurance, and maintenance. Any homeowner can tell you these can vary significantly from one year to the next. And, net leases tend to have long initial terms of 15 years or more, with annual rent increases, or escalators, built in.
While past performance doesn't guarantee future results, the fact that investors in Realty Income's NYSE listing 24 years ago are sitting on a roughly 3,300% gain (assuming dividend reinvestment) shows the power of this business model.
This fintech giant could be just getting started
There are few stocks that I'm more excited about from a long-term perspective than Square. Over the past few years, Square has evolved from a payment processing hardware company to a rapidly expanding financial ecosystem for businesses as well as individuals.
There's a ton of growth potential across Square's business segments. Its payment-processing hardware is only used by a small fraction of its addressable market, the majority of its 2 million merchants haven't taken advantage of the Square Capital business lending platform yet, and its Caviar foodservice platform's addressable market could generate $11 billion in annual revenue, according to the company.
However, the part of Square's business that has the most exciting long-term potential is its Cash App. To be clear, the app itself isn't likely to generate needle-moving revenues anytime soon. However, what it's doing is bringing millions of people into Square's ecosystem. Square CFO Sarah Friar recently said that the company has ambitions to develop several banking products -- consumer lending, checking, and brokerage services are just a few possibilities. And with 7 million active Cash customers, there's big potential for products like these to gain serious traction.
Defensive real estate with lots of room to grow
My final millionaire-maker stock to discuss is another REIT -- this one focused on healthcare properties.
HCP invests in a portfolio of medical office, life science, and senior housing properties, all of which have tremendous potential for growth over the coming decades.
For starters, medical offices should benefit from the aging U.S. population. By 2030 there will be about 19% more senior citizens in the U.S., and this group visits medical offices more than twice as often as the 45-and-under age group.
Growth is expected to be even faster in the oldest segments of the population. In fact, the 80-and-older population is expected to surge by 56% over the next 12 years, which should create tremendous demand for senior housing. And finally, venture capital investment in the life sciences has roughly doubled in the past decade and is showing no signs of slowing down.
In a nutshell, HCP specializes in three types of healthcare real estate with extremely strong growth potential over the next few decades. With a solid balance sheet and willingness to spend aggressively on value-creating property development, HCP shareholders who are in it for the long haul could be handsomely rewarded.
