5 States With the Highest Median Household Income
Have you ever heard the phrase "Location is everything?" In real estate it can mean the difference of a between a home that costs you $125,000 in the Ohio River Valley and the same-square-footage home that runs 10 times as much on the West Coast.
The same can be said for the jobs market. Occasionally the best-paying jobs flock to certain regions of the country while leaving others out in the cold.
With that in mind, today I propose to look at the five states with the highest median household income as ranked by the U.S. Census Bureau on average over the past three years. "Why?" you ask? Because sometimes the best investing strategy really is to "follow the money" in its most literal sense. By examining which states have the highest household income, we can look for companies that thrive in those states and perhaps gain an edge by examining an angle that other investors haven't thought about.
Here are the five states with the highest median household income from 2011 to 2013:
Median Household Income (Three-Year Average)
One common theme here is that we're looking at East Coast states predominantly on the water. We're also examining five relatively small states, so a smaller population figure may be playing a role in skewing these numbers slightly. However, by the looks of these figures, which range between 62% and 77% higher than the lowest-ranked state, businesses should clearly be concentrating their efforts on reaching consumers in these states.
A few potential winners
One business that would stand out which has a definitive bias toward the East Coast, including New England and the Chesapeake Bay region, is Dunkin' Brands' Dunkin' Donuts. Laugh all you'd like, but there's an incredible allure to Dunkin' Donuts every time I head to the East Coast. One of the driving forces behind its recent success has been the introduction of its own gourmet coffee brand and its partnership with Green Mountain Coffee Roasters in 2011, which allowed Dunkin' to offer 14 single-serve packs of its name-brand coffee in K-Cups for use in Keurig machines in its stores. Dunkin' has actually been so successful recently that it's ready to dip its toes into the West Coast's waters once again, but we also have to remember it's been turned away without success before.
Another name that derives plenty of success in the aforementioned five states is drugstore CVS Caremark . I know what you're thinking, that it's probably not a fair comparison to include CVS since it operates in all but seven states predominantly located in the West. However, CVS has such strong roots and a high concentration of drugstores on the East Coast that it's a company I'd be doing a disservice to if I didn't mention it. Headquartered in Rhode Island, smack dab in the middle of many of these aforementioned affluent states, CVS could become a big beneficiary of Obamacare's health care reform plan. If more people are insured and going to their doctor for preventative care, there's a good chance that more prescriptions will be written. And who is more likely to be able to afford health insurance in this country? None other than states with the highest median household income!
Finally, I would point to Spectra Energy which is one of the nation's largest natural gas transmission, pipeline, and storage companies. Most intriguing, though, is that Spectra owns Texas Eastern Transmission, which is responsible for bringing 7.3 billion cubic feet of natural gas per day from the Gulf of Mexico up into New Hampshire, Connecticut, Massachusetts and Rhode Island, based on statistics from the Energy Information Administration. Spectra should already be a big beneficiary, considering that large shale gas finds in the U.S. will keep its transmission and storage business active for decades to come, but it also operates in a region where higher incomes mean little fluctuation in natural gas demand even when a recession hits.
Stay tuned, as tomorrow we'll turn the tables and look at the five states with the lowest median household incomes and see what businesses may struggle because of their concentration in these regions.
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The article 5 States With the Highest Median Household Income originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool recommends Green Mountain Coffee Roasters and Spectra Energy. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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