Over the next several weeks I plan to look at different sectors that have traditionally been very friendly to dividend investors. Each of these sectors have attributes that make the companies in them potentially desirable to long-term buy-and-hold dividend growth investors. Understanding these attributes will hopefully help us to select the very best companies for our income portfolios. First up the Consumer Goods Sector…
Consumer Goods Attributes
Demand for household and personal care products is generally stable and not affected by changes in the economy or other factors. There are certain things people will continue to purchase no matter how bad the economy gets. If you lose your job, you probably won’t stop bathing, washing your clothes, brushing your teeth or stop buying toilet paper. Given the relatively low price of most consumer goods, consumers often prefer to pay a few pennies more for a name brand that they are confident with.
Raw material costs is a primary driver of profitability, and the larger more established companies are in a better position to negotiate better terms. Growth comes from a growing population and expanding into emerging markets where the people are starting to earn a wage they can not only life on, but begin to buy things we consider necessities.
Consumer Goods Companies
Below are several leading Consumer Goods companies that I follow. The companies selected have a dividend yield in excess of 2.25% and have raised their dividends for at least 5 years (all but one are in excess of 10 years).
McCormick & Company (MKC) | Yield: 2.3% | Growth: 8.3% | Years: 24
McCormick & Company Inc. manufactures, markets and distributes flavor products and other specialty food products to the entire food industry.
J.M. Smucker Company (SJM) | Yield: 2.6% | Growth: 7.6% | Years: 12
J.M. Smucker Co.’s products include coffee, fruit spreads, peanut butter, shortening and oils, ice cream toppings, health and natural foods, and beverages. The Folgers coffee business was acquired in November 2008.
Colgate-Palmolive (CL) | Yield: 2.6% | Growth: 12.5% | Years: 47
Colgate-Palmolive Company (Colgate) is a major consumer products company that markets oral, personal and household care, and pet nutrition products in more than 200 countries and territories.
Weyco Group, Inc. (WEYS) | Yield: 2.7% | Growth: 15.0% | Years: 29
Weyco Group, Inc. distributes, wholesale & retail, men’s branded footwear in the U.S., Canada, Europe; offers casual footwear, dress shoes and accessories under Florsheim, other brands.
Coca-Cola Company (KO) | Yield: 2.8% | Growth: 7.3% | Years: 48
The Coca-Cola Company is the world’s largest soft drink company, KO also has a sizable fruit juice business.
Bemis Company, Inc. (BMS) | Yield: 2.8% | Growth: 2.2% | Years: 27
Bemis Company Inc. is a leading maker of a broad range of flexible packaging and pressure-sensitive materials.
Pepsico, Inc. (PEP) | Yield: 2.9% | Growth: 6.5% | Years: 38
PepsiCo, Inc. is a major international producer of branded beverage and snack food products.
V.F. Corporation (VFC) | Yield: 3.0% | Growth: 2.1% | Years: 36
V.F. Corp is global apparel company, with leading shares in denim and daypacks. It is transforming itself into a designer and marketer of lifestyle apparel brands.
Procter & Gamble (PG) | Yield: 3.0% | Growth: 7.0% | Years: 54
The Procter & Gamble Company is a leading consumer products company markets household and personal care products in more than 180 countries.
Sonoco Products Co. (SON) | Yield: 3.1% | Growth: 1.9% | Years: 27
Sonoco Products Co. makes paper and plastic packaging products serving various industries and markets in more than 85 countries.
Avon Products, Inc. (AVP) | Yield: 3.1% | Growth: 4.8% | Years: 20
Avon Products Inc. is the world’s leading direct marketer of cosmetics, toiletries, fashion jewelry, and fragrances and has more than 5 million sales representatives worldwide.
The Clorox Company (CLX) | Yield: 3.4% | Growth: 9.3% | Years: 35
The Clorox Company is a diversified producer of household cleaning, grocery and specialty food products and is also a leading producer of natural personal care products.
H.J. Heinz Company (HNZ) | Yield: 3.8% | Growth: 1.9% | Years: 7
The H.J. Heinz Company produces a wide variety of food products worldwide, primarily condiments, convenience meals and snacks.
Kimberly-Clark Co. (KMB) | Yield: 4.1% | Growth: 6.7% | Years: 38
Kimberly Clark Corp. is a global consumer products company that produces tissue, personal care and health care. Its brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott and Kimberly-Clark.
Leggett & Platt, Inc. (LEG) | Yield: 4.7% | Growth: 3.0% | Years: 38
Leggett & Platt Inc makes a broad line of bedding and furniture components and other home, office and commercial furnishings, as well as diversified products for non-furnishings markets.
The Consumer Goods is the third largest sector in my database of dividend stocks. Of the 198 stocks that I track, it currently is represented by 30 stocks (15%). As noted above this is a very important sector for dividend growth investors. It it brings yield stability and potential growth to an income portfolio. Many income and value portfolios are over-weighted in Consumer Goods, including Warren Buffett’s Berkshire Hathaway (BRK.A) at 42%. Keep the soap and toilet paper coming!
Full Disclosure: Long CL, KO, PEP, PG, CLX, KMB, LEG. See a list of all my income holdings here.
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