How has this ASX 200 stock returned 14% per annum over the past five years?

How has this stock beaten the pants off the market since 2019?

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When an ASX 200 stock returns more than 14% per annum over a five-year period, it's usually more than enough to make investors sit up and pay attention.

After all, the average return of an S&P/ASX 200 Index (AS: XJO) fund over the past five years has been around 9% per annum. So anything over that makes a stock a market-beating investment, which is the ultimate goal of any active ASX investor. And a 14% average makes for a real winner.

The ASX 200 stock in question today is none other than construction materials manufacturer Brickworks Ltd (ASX: BKW).

Over the past five years, the Brickworks share price has risen from just over $16.50 to the $27 we see today. That works out to be a 63% return or 10.27% per annum.

Adding to that Brickworks' dividends, which I estimate adds around 4% per annum, and we get to a total shareholder return of around 14% per annum. It would be even higher if we factored in the full franking credits that are typically attached to Brickworks' dividend payments.

Needless to say, these are the kinds of returns any investor would be happy with.

But how has Brickworks done it? What's this company's secret sauce that makes it a convincing market beater?

Well, it's hard to put a finger on this secret sauce, because Brickworks is a far more complex company than its name might suggest. Sure, this ASX 200 stock's primary business is the manufacturing of construction materials, including tiles, masonry and yes, bricks.

But during its decades of operation, Brickworks has also worked on building several other streams of income, which it uses to both buttress its earnings base and offset the cyclical nature of the construction industry.

What makes this ASX 200 stock a market beater?

For one, it is a significant property investor. Brickworks likes to build manufacturing facilities close by to neighbourhoods that are experiencing high levels of residential and industrial construction, due to the significant costs of transporting its heavy products.

However, as these neighbourhoods develop, Brickworks has been in the habit of either developing and adding value to these land parcels and reaping rental returns, or else selling them off entirely for a profit.

This has worked wonders for this ASX 200 stock over long stretches of time. In its most recent half-year earnings announcement, Brickworks reported $76 million in underlying earnings from its property portfolio, which was more than the $64 million the company made from both Australian and North American building products.

Another winning feature of Brickworks' business model has been its investment portfolio. Due to a historical arrangement, Brickworks owns a massive 26.1% stake in ASX 200 investment house Washington H. Soul Pattinson and Co Ltd (ASX: SOL). In turn, Soul Patts also has a similarly-sized stake in Brickworks itself.

Soul Patts shares have also been a long-term ASX 200 market beater, as we've extensively documented here at the Fool. Brickworks has benefitted enormously from Soul Patts' success, as well as its 24-year streak of annual dividend increases. In its half-year report, Brickworks revealed that its investment portfolio increased by $140 million over the six month period.

As such, we can probably conclude that it's Brickworks' diversified earnings base and savvy business model that have combined to make it an ASX 200 market-beating stock over the past five years. No doubt shareholders will be hoping that the ride continues for the next five years and beyond.

Motley Fool contributor Sebastian Bowen has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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