Wednesday, January 6, 2010

Five Consumer Stocks for 2010

With the expectations that the financial crisis appears to be over, investors have bid up stocks to the highest levels in over a year. There’s a lot of optimism in the news, including major banks repaying TARP money, unemployment stabilizing, and major economies rebounding. If economies rebound, then consumers would be able to start spending more on everyday items, trading up from generic brands to brand name products.

The companies which could benefit from this include Johnson & Johnson (JNJ), Procter & Gamble (PG), McDonald’s (MCD), Wal-Mart (WMT) and Coca Cola (KO). They all have durable competitive advantages, which has allowed each company to become a member of the elite dividend aristocrats index after raising distributions for over a quarter of a century.

The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. It principally offers sparkling and still beverages. The company has increased distributions for 47 consecutive years. I would be a buyer of KO below $54.66. Check my analysis of the stock.

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The world’s largest retailer has a 35 year record of annual dividend raises. I would be a buyer of WMT on dips. Check my analysis of the stock.

McDonald’s Corporation (MCD), together with its subsidiaries, franchises and operates McDonald’s restaurants in the food service industry worldwide. Its restaurants offer various food items, soft drinks, and coffee and other beverages. The golden arches has raised dividends for 33 years. I would be a buyer of MCD as long as it trades below $73. 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 has boosted distributions to shareholders for 47 years in a row. I would be a buyer of JNJ below $65.33. Check my analysis of the stock.

The Procter & Gamble Company (PG) engages in the manufacture and sale of consumer goods worldwide. The company operates in three global business units (GBUs): Beauty, Health and Well-Being, and Household Care. The company has rewarded stockholders with dividend increases for 53 consecutive years. I would be a buyer of PG below $58.67. Check my analysis of the stock.

Even if the recovery is characterized by lower consumer participation, these stocks should benefit, particularly because their revenue streams are stable and globally diversified. A decline in the stock market would present a great opportunity to initiate or add to positions in the global powerhouses.

Full Disclosure: I have positions in every company listed above

Relevant Articles:

- Dividend Aristocrats List for 2010
- McDonald’s (MCD) Dividend Stock Analysis
- TARP is bad for dividend investors
- Six things I learned from the financial crisis

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