People really like the food from Cava Group (CAVA 10.50%) -- and the company's stock, too. The fast-growing Mediterranean-style chain went public on June 15 at $22 per share, and a month later has soared to above $50.
That comfort food, however, might not be in your comfort zone when it comes to investing, especially if you have an appetite for income rather than growth. In that case, you might consider Cava's first landlord, Federal Realty Investment Trust (FRT -0.37%).
Or you might even own them both. Let's explore.
Federal Realty is a retail-focused real estate investment trust (REIT) that leased Cava the space for its first-ever location -- in Bethesda Row, one of more than 100 mixed-use retail, residential, and office centers this REIT owns in upscale suburbs across the country.
But Cava didn't have to go across the country to find its first landlord. The two companies are headquartered just a few miles apart in the Washington, D.C., suburb of North Bethesda, and their relationship continues to grow.
A growing relationship
Cava had more than 260 locations as it went into its IPO. Eight of those are in Federal Realty properties -- in Maryland, Virginia, New Jersey, and California. Cava is also using the Pike & Rose center in North Bethesda to launch its new concept restaurants Julii and Melina, says Brenda Pomar, Federal Realty's director of corporate communications.
Pomar said that the first-ever location "marked the beginning of what we believe to be a long-term, mutually beneficial partnership. We are proud to be a part of their growth story and to provide our investors with an indirect opportunity to participate in their success."
Pomar added: "While the current number might seem modest, we view this as a testament to the selective and strategic nature of our partnership. Each location has been carefully chosen for its potential to contribute to the vibrant and diverse dining experiences we strive to offer at our properties."
Classic stocks of different kinds
Federal Realty and Cava Group represent very different investment strategies when it comes to buying and holding stocks, and each has its place.
Cava Group is a growth stock at this point. Because it's really new and hasn't even had a full quarter to report losses or gains as a public company, you can forget about dividends. If you're buying this stock, you're looking to profit from buying low and selling high.
While Cava has strong long-term growth potential, it may well not be profitable for years as it invests in its own growth. It is wildly popular, though, and off to a good start; some say it could be the next Chipotle Mexican Grill.
Federal Realty, one of the first publicly traded REITs, is a classic income stock. It's a Dividend King, one of that exclusive group of stocks that have posted more than 50 straight years of dividend increases. At the moment, Federal Realty is selling for about $101 a share, and after 55 straight years of dividend increases, it's currently yielding about 4.3%.
The company has a rock-solid balance sheet, seasoned management that has successfully executed its strategy for decades, and a tenant list anchored by necessity-based retailers in affluent, recession-resistant neighborhoods. Federal Realty is already profitable, but may see slower growth.
You don't have to choose just one
But you don't have to choose just one of these. Diversify your portfolio a bit more by buying both if you'd like. That way you could benefit from Cava's growth while also receiving a safe, growing stream of passive income from Federal Realty.
It could be a delicious way to reduce risk while reaping rewards. That's something to consider next time you sit down to a bowl of Cava's latest creations.
