From The Dividend Monk:
This is the first in a new series of articles highlighting dividend companies that specifically have large and durable economic advantages, or “moats,” that protect their business operations and allow years or decades of strong profitability. When looking for long-term investments, one typically wants to find a business that isn’t just doing well simply because management is on top of their game right now, but rather because the business itself has fundamental and difficult to replicate advantages over its competitors.
Companies that have large economies of scale have durable advantages over their competitors because they have logistic or price advantages, and therefore attract more customers and solidify their size advantage even more. It creates a feedback loop of success that rivals have a difficult time dealing with. Companies that compete against larger rivals have price and efficiency disadvantages, and usually must sacrifice profitability levels to even stay in the game, or must try to change the nature of the game to circumvent the moat.
This article provides seven examples of companies that have a dramatic size that they utilize efficiently to keep competitors from catching up, matching their prices, or competing with their established distribution networks…