It may not even occur to you as you go shopping, but many of the brands that you know and love are actually publicly traded companies. This means you can invest in their stocks on the open market and participate in their success. But does it make financial sense to invest in companies just because you use their products?
Here are some of the reasons why you may want to consider investing in the stocks of your favorite brands.
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Famous investors from Peter Lynch to Warren Buffett have touted the idea for decades that you should invest in what you know. If you’re an avid Costco shopper, for example, you likely know very well how the store operates, what products it offers and how its customer service and product quality match up to its competitors. If you can remove emotion from the equation and analyze these facts objectively, you could have a leg up when determining whether or not a company is a good investment.
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When you buy a company’s stock, you become a part-owner. Granted, the percentage of the company you will own, even with a big purchase, is minuscule, but you still participate in the success of the stock the same as any institutional investor. When you spend money at your favorite store, you’re directly contributing to your own success by generating sales. The same is true if you refer all your friends and they become customers also.
Some companies reward their shareholders with various perks. Royal Caribbean, Carnival and Norwegian Cruise Line, for example, offer their shareholders onboard credit for owning at least 100 shares, according to Tiicker. Whirlpool offers shareholders a 30% discount with the purchase of just one share. And Berkshire Hathaway not only grants access to its annual shareholder meeting, which is a globally televised, two-day event that fills a sports arena, but it also gives 8% off a Geico insurance plan if you own a single share.
Most well-known, established brands pay cash dividends to shareholders as a way of distributing their profits. If you’re a fan of cash-back credit cards, buying stocks that pay a dividend should be right up your alley. The S&P 500 index, which consists of the 500 largest companies in America, currently pays a dividend yield of 1.25%, but some popular brands, like Pepsi, pay as much as 4.31%, according to Yahoo Finance. That’s more than you could earn from most government bonds and high-yield savings accounts and it doesn’t even factor in the capital appreciation potential of the stock.
