With the end of the financial crisis of 2007-2009, and unemployment leveling off, investors are once again bullish on stocks. The stock market, which many economists consider to be a leading indicator of the economy, is trading at its highest levels in over two years. Apart from the so called PIGS – Portugal, Ireland, Greece and Spain, the world economy is headed for another year of positive GDP growth in 2011. The most notable economic rebound is seen in the emerging market powerhouses like Brazil, China and India, where the growing number of middle class consumers is generating higher profits for the companies featured below. Overall, growth in the world economy translates into consumers increasing their discretionary spending and trading up from generic brands to brand name products.
The companies that could benefit from the increase in consumer spending all have diversified portfolios of strong brand names, wide moats and high returns on equity. Their strong fundamentals have enabled them to weather several recessions over the past 2 decades and have also allowed them to increase dividends for over a quarter of a century. The companies that could benefit from increased consumer spending include:
Wal-Mart Stores (WMT) is the world’s largest retailer, which operates retail stores in various formats in the US and worldwide. The company has raised distributions for 36 years in a row and yields 2.30%. I would add to my position in the company on dips below $49. Check my analysis of the stock.
PepsiCo, Inc. (PEP) manufactures, markets, and sells various foods, snacks, and carbonated and non-carbonated beverages worldwide. The company operates in four divisions: PepsiCo Americas Foods (PAF), PepsiCo Americas Beverages (PAB), PepsiCo Europe, and PepsiCo Asia, Middle East and Africa (AMEA). PAF divisions. The company has raised distributions for 38 years in a row and yields 2.90%. The company is attractively valued at the moment at 16.60 times earnings. Check my analysis of the stock.
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. The company has consistently raised distributions for 48 years in a row and yields 3.50%. The company is attractively valued at the moment at 12.80 times earnings. Check my analysis of the stock.
The Clorox Company (CLX) engages in the production, marketing, and sales of consumer products in the United States and internationally. The company operates through four segments: Cleaning, Lifestyle, Household, and International. The company has regularly raised distributions for 33 years in a row and yields 3.50%. The company is attractively valued at the moment at 14.30 times earnings. Check my analysis of the stock.
McDonald’s Corporation (MCD), together with its subsidiaries, operates as a worldwide foodservice retailer. The company has raised distributions for 34 years in a row and yields 3.20%. The company is attractively valued at the moment at 17 times earnings. Check my analysis of the stock.
Kimberly-Clark Corporation (KMB), together with its subsidiaries, engages in the manufacture and marketing of various health care products worldwide. The company operates in four segments: Personal Care, Consumer Tissue, K-C Professional & Other, and Health Care. The company has raised distributions for 38 consecutive years and yields 4.20%. The company is attractively valued at the moment at14.30 times earnings. Check my analysis of the stock.
The sustainable dividends that these defensive companies are paying would certainly provide a cushion if the market goes down or stays flat throughout 2011. A continuation of the bullish performance of 2010 this year would most likely lift these stocks as well, leading to strong capital gains in the process. The diversified revenue streams of their products and their global reach would help these companies withstand any economic conditions. Any decline in the underlying stock prices is an opportunity to initiate or add to existing positions.
Full disclosure: Long all stocks mentioned above
- Ten Dividend Stocks with High Returns on Equity
- Strong Brands Grow Dividends
- Dividend Aristocrats list for 2011
- Dividend Investing Works in All Markets
Warren Buffett is the most successful investor of all time. Warren Buffett was able to keep learning about investments and business from t...
When selecting a dividend stock, investors should look at the dividend last. Income investors should first focus on profitability when inves...
As a dividend investor, my main goal is to attain financial independence when dividend income exceeds expenses by an adequate margin of saf...
One of my favorite aspects of dividend growth investing is the ability to receive more passive dividend income, simply because I made the ri...
There are many risks to investing . One of the major risks that could ruin a portfolio’s chances of generating adequate dividends are p...
In my investing, look for businesses I can understand that have some sort of a competitive advantage that translates into consistent earn...
Rebalancing is the process where investors sell an asset that takes an above average allocation in their portfolio, and use the proceeds to ...
There are several factors that drive future investment returns. The important drivers behind future returns on equity investments include: ...
The goal of every dividend investor is to generate dividend income that is larger than their annual expenses. This coveted goal is calle...
Before I begin my message, I wanted to wish all my readers a Happy 4th of July. And I wanted to thank all of those military members for keep...