When it comes to building a robust investment portfolio, diversification is key. Investors often focus on grouping stocks by sectors or industries, but sometimes, the most valuable insights come from comparing seemingly unrelated companies. Cava (CAVA), a rapidly growing fast-casual restaurant chain, and Realty Income (O), a real estate investment trust (REIT) specializing in retail properties, might appear to serve different purposes. Yet, both provide unique opportunities for investors to capitalize on retail and restaurant trends. This comparison explores how these two companies cater to varying investment goals—growth potential and long-term stability—helping you decide which fits your portfolio best.
Both companies operate in different industries and cater to different investor objectives. Here’s why understanding their business models and growth trajectories is essential for making informed investment decisions.
What Does Cava Do vs. Realty Income?
Cava is a Mediterranean-themed fast-casual restaurant chain that has garnered immense popularity in recent years. Its appeal lies in offering fresh, healthy meals in a quick-service environment. Cava’s same-store sales growth of 18.1% is a staggering figure in the restaurant industry, where low single-digit growth is usually considered strong. The company’s expansion is noteworthy, increasing its store count by over 21% year-over-year to 352 locations. With comparisons being drawn to Chipotle Mexican Grill, which operates more than 3,600 locations, Cava’s growth potential seems massive.
Realty Income, on the other hand, is a REIT specializing in leasing properties to a diverse tenant base. Roughly 73% of its rents come from retail properties, including restaurants. While less than 10% of its total rent roll comes from quick-service and casual-dining restaurants, Realty Income benefits from its diversification. Its model is less about betting on individual restaurant success and more about ensuring steady rental income across a wide range of tenants.
Cava’s Rapid Growth: High Reward, High Risk
Cava’s meteoric rise—its stock has surged by 300% in just one year—has excited growth investors. The company’s ability to replicate Chipotle’s assembly-line service model makes it a promising player in the fast-casual dining space. However, with a price-to-earnings ratio of 340, the stock is highly overvalued, and much of the good news is already priced in. Investors must consider the risks of overexpansion or declining consumer interest, as history is filled with restaurant chains that failed after initial success.
While Cava’s potential for long-term growth is undeniable, it’s worth noting that the restaurant industry is notoriously cyclical. For every success story like Chipotle, there are cautionary tales like Red Lobster, which declared bankruptcy in 2024. Investors in Cava must be prepared for significant volatility and have confidence in the company’s ability to sustain its growth trajectory.
Realty Income: A Pillar of Stability
In contrast, Realty Income offers a steady income stream with far less risk. Its dividend yield currently stands at an attractive 5.5%, and the company has a remarkable track record of increasing dividends for over three decades, with a compound annual growth rate of 4.3%. The company’s portfolio of over 1,550 unique tenants minimizes risk from individual tenant defaults, making it a reliable choice for conservative investors.
Unlike Cava, Realty Income is not a growth stock but an income investment. It generates reliable returns by leasing properties to various tenants and owns physical assets that retain value even during economic downturns. For investors seeking stability, this “tortoise” approach may be more appealing than chasing high-growth “hares” like Cava.
Balancing Growth and Stability in Your Portfolio
Both Cava and Realty Income cater to different investor needs, but they can complement each other in a diversified portfolio. Cava represents the high-risk, high-reward category, offering potential for explosive growth in the fast-casual dining space. Realty Income, with its steady dividends and broad tenant base, provides a counterbalance by adding stability and reducing overall portfolio risk.
For growth-focused investors, Cava could be a lucrative addition, especially if the company continues its aggressive expansion and maintains strong same-store sales growth. Meanwhile, income-oriented investors who value reliability over rapid returns will find Realty Income’s consistent performance and dividends hard to beat. By combining these two stocks, investors can enjoy the best of both worlds: growth potential and income stability.
Realty Income: A Retail Powerhouse
Realty Income’s ability to weather market challenges and continue generating revenue highlights its resilience. Even if a tenant like Cava were to falter, Realty Income’s broad portfolio ensures that its overall performance remains unaffected. This is particularly appealing in uncertain economic times when individual companies can struggle. By investing in Realty Income, you’re essentially gaining exposure to the restaurant and retail sectors without tying your fortunes to any single brand.
A Strategic Choice for Every Investor
Whether you’re drawn to Cava’s explosive growth or Realty Income’s steady dividends, both stocks offer unique advantages that cater to different investor objectives. Growth investors looking for the next big thing in the fast-casual dining industry may find Cava a compelling choice, but they should be prepared for volatility. On the other hand, conservative investors seeking predictable income and long-term stability will likely prefer Realty Income.
The choice ultimately depends on your financial goals and risk tolerance. For a well-rounded portfolio, combining high-growth stocks like Cava with income-focused investments like Realty Income can provide the perfect mix of opportunity and security. Diversification remains the key to navigating the ever-changing landscape of the stock market.