What is competitive advantage you ask? You have come to the right place!
It’s the edge that a company has over its competitors in the marketplace. It allows them to increase earnings for their shareholders in the face of stiff competition. The company’s competitive advantage could be their branded products and the consumer loyalty they have build around them.
For example, consumers are generally pretty picky about which brand of laundry detergent they use. They have most likely tried a few different brands and have settled on the one they like best. If the price of their favorite laundry detergent increases by 10 cents, they will most likely be OK with this and continue to use the product because they are loyal to the brand!
That is competitive advantage my fellow dividend growth investors! A dividend paying company that has the ability to increase prices without losing customers is to be envied. These are the types of stocks we have our sights set on.
In a commodity type business where competitors sell the same product, the low cost producer has the advantage. They can sell products at a discount to their competitors and still hit their margins. If the products are the same, the customer will choose the one at the best price.
Business is brutally competitive. If a company is doing well, you can be sure that competitors will do everything they can to take away some of their market share.
For long term success, invest in dividend growths stocks that are leaders in their industries and have sustainable advantages over their competitors!
Ok that wraps up our lesson on competitive advantage.
Let’s keep it up you are doing great!
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