Shares in Woolworths Limited (ASX: WOW) are trading within about $1 of their record all-time high of $38.92. For long-term investors the returns from this blue chip stock have been nothing short of exceptional. Over the past 14 years Woolworths' share price has gained 552%, providing massive outperformance against the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) which has gained 81%.
Even over the shorter time periods of five years and one year, Woolworths has still managed to provide solid outperformance for shareholders, with the stock beating the index by around 6% over both time frames.
With a market capitalisation of $47 billion and operations in what are primarily mature markets, it's understandable if some shareholders are now wondering if the best days for Woolworths are behind it.
Although such strong growth rates will indeed be difficult to achieve into the future, here are three reasons why the stock could still continue to outperform the wider market.
1) Market leadership. It is very hard to imagine any entrants or competitors ever knocking Woolworths off its perch as the leading supermarket retailer in Australia. This position has been built over many decades and will be defended rigorously.
2) Growth potential. While future growth from its mature businesses can be expected to be more or less in line with general economic growth, Woolworths' management is busily forging into new markets which do offer significant growth potential. The most obvious of these is the Home Improvement offering but the potential to cross-sell financial services and utilities where it can leverage its brand name and customer base could also be rewarding.
3) Fully franked dividends. With the dividend forecast to rise to 139 cents per share in financial year 2014, at today's share price investors are receiving a very dependable yield of 3.7%.
