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3 Growth Stocks That Have Now Beaten the Market for 5 Straight Years

By David Jagielski – Dec 31, 2021 at 6:00AM

Key Points

  • Innovative Industrial has benefited from a rapidly growing cannabis market.
  • Microsoft is a tech beast that continues to find new growth avenues.
  • Intuit has helped many businesses grow over time, which has helped it deliver fantastic returns.

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Can they keep their streaks going in 2022 and beyond?

Many stocks can beat the market in a given year. But to do it for five years in a row is something special, and that compounding growth can be incredibly meaningful for its shareholders. Here are three stocks that have achieved that five-year feat: Innovative Industrial Properties (IIPR -0.62%)Microsoft (MSFT 0.57%), and Intuit (INTU 2.47%).

With returns all above 40% (and that's without factoring in their dividend payments), 2021 marked another year of market-beating yields for these three stocks -- outperforming the S&P 500, which itself rose by more than 27%. Here's what's promising about these growth stocks and why 2022 could be another great year for the businesses and their investors.

IIPR Chart

IIPR data by YCharts

1. Innovative Industrial Properties

Innovative Industrial Properties went public toward the end of 2016. And since 2017, the cannabis stock has provided investors with better returns than if they had invested in the S&P 500. Innovative Industrial's stock has risen by more than 1,300% since 2017 while the market's top index has increased by just 114%. And that's without including its dividend which today yields 2.3% -- a full percentage point higher than what investors can earn with the average S&P 500 stock where the payout is just 1.3%.

The driving force behind this company's allure is the growth of the cannabis industry. A safer bet than a marijuana producer, the company is a real estate investment trust that provides cannabis growers with valuable cash flow through sale-and-leaseback agreements. In return, the REIT gains a steady stream of money that it collects on a recurring basis (and pays out a juicy dividend to investors.)

As of Sept. 30, the company owned 75 properties across several key states, including New York and New Jersey -- both of which passed legislation in 2021 legalizing marijuana for recreational use.

Revenue through the first nine months of last year totaled $145.6 million, which is a year-over-year increase of 82%. With more growers entering the industry and more states likely to legalize pot over the next few years, there's little doubt that Innovative Industrial will continue posting impressive numbers for the foreseeable future. And that's why I expect that it will beat the market again in 2022.

A person delivering a presentation.

Image source: Getty Images.

2. Microsoft

Tech giant Microsoft is an incredibly safe buy, and so you might be surprised to learn that it has also been a top growth investment in recent years. With gains of 449% over the past five years (excluding dividends), it has left the S&P 500 in the dust. Its dividend yield of 0.7% is modest but can still provide growth investors with some steady cash flow in addition to its terrific returns.

A big reason for that is the company's products are popular with consumers and businesses. And with many segments to grow, whether it's gaming (Xbox), computer hardware (Surface laptops), cloud computing (Azure), or software (Microsoft 365), the business has many ways to pad its numbers. This is especially true now that the pandemic has pushed businesses to focus more on digitizing their operations, which has led to more people working remotely. According to CEO Satya Nadella, "the Microsoft Cloud delivers the end-to-end platforms and tools organizations need to navigate this time of transition and change."

In its most recent quarter, for the period ending Sept. 30, sales of $45.3 billion rose 22% year over year and Microsoft earned $20.5 billion on that, netting an impressive profit margin of 45%. The company generated double-digit revenue growth in most of its segments, and it looks poised for another strong year of growth ahead in 2022. This too looks like a stock that may continue climbing over the next 12 months, and beyond. 

3. Intuit

Intuit isn't as diverse of a business as Microsoft, nor is it in an up-and-coming sector like cannabis, but the software company has generated the best five-year gains on this list, at 466%. Those returns also don't factor in its dividend, which yields 0.4%.

Known for its tax software (TurboTax) and accounting solutions (QuickBooks), Intuit provides significant value for businesses and consumers alike. It refers to itself as the "global leader in helping small businesses grow." 

In fiscal 2021 (which ended on July 31), Intuit reported sales of $9.6 billion, which rose 25% year over year. And in 2022, those numbers will be even higher, with Intuit projecting at least $12.1 billion in revenue for the year. A big part of the reason for that is that the company has recently closed on two acquisitions: marketing company Mailchimp and Credit Karma, a personal finance business. Both should complement Inuit's existing operations.

Intuit is another example of a business that has been growing at an incredible rate and that will only get bigger in the future. It also looks to be in a great position to continue its streak of beating the S&P 500 in 2022.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns and recommends Innovative Industrial Properties, Intuit, and Microsoft. The Motley Fool has a disclosure policy.

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