by Dan Burrows | July 26, 2012 12:51 pm
A slowing global economy and the effects of a stronger dollar couldn’t keep four of InvestorPlace’s most Dependable Dividend Stocks down in the second quarter, as 3M (NYSE:MMM), Colgate-Palmolive (NYSE:CL), Kimberly-Clark (NYSE:KMB) and McGraw-Hill (NYSE:MHP) all managed to meet or beat Wall Street estimates.
It was a tough three months, to be sure, with revenue gains hard to come by, as weaker demand from overseas and currency exchange tamped down revenue. But shares in all four companies rose smartly Thursday, helped by the solid bottom-line results and positive earnings outlooks.
That’s good news for income investors. Not only do all these names have long histories of rising payouts, but now they’re getting some solid share-price appreciation, too.
3M, the Dow component best known to consumers for Scotch Tape and Post-it notes, said second-quarter earnings rose only fractionally to $1.17 billion, or $1.66 per share, but that still exceeded analysts’ average estimates by a penny.
Sales slipped almost 2% to $7.53 billion, hurt in part by converting weaker euros into stronger dollars. Additionally, a slump in 3M’s consumer electronics division, which makes things like films for flat-panel TVs, offset better results in industrial products and medical supplies.
But most important, 3M maintained its full-year outlook for earnings of $6.35 to $6.50 a share.
The stock rallied nearly 4% after the opening bell, outpacing the Dow’s own impressive gains, and yet still offered a dividend yield of 2.6%. (Yields and prices move in opposite directions.)
Not to be outdone, shares in Colgate-Palmolive rose sharply Thursday after the maker of toothpaste and dish soap said price hikes and cost cuts allowed earnings to match Street forecasts.
Like 3M, the stronger dollar and weaker demand hurt revenue, but Colgate navigated the challenges well enough. Net income rose less than 1% to $627 million. On an adjusted basis, earnings of $1.33 a share matched Street estimates.
Revenue, though depressed by global weakness, still grew almost 2% to $4.27 billion, coming in ahead of analysts’ outlook.
Meanwhile, all-important gross margin expanded to 57.7% from 57.4%. That might not sound like much, but it comes to 300 basis points, which essentially is a bonanza — and of particular importance to any company trying to manage in a world where costs for everything from oil to packaging to energy are rising.
Best of all, even after leaping Thursday, Colgate’s stock still offered a dividend yield of 2.35%.
Like Colgate, Kimberly-Clark was able to manage the higher-cost environment with price hikes that didn’t turn off customers and hurt volume.
The maker of Kleenex tissues and Huggies diapers, among many other well-known brands, also successfully curbed costs. That helped profit grow despite flat sales, which, like most international companies, was hit by the effects of a stronger dollar.
For the most recent quarter, Kimberly-Clark reported a 22% rise in net income to $498 million, or $1.26 a share. Excluding items, earnings came to $1.30 a share, beating the Street’s forecast by 2 cents.
Revenue barely budged, coming in at $5.27 billion versus $5.26 billion last year, but that still squeaked past analysts’ average estimates.
Of course, stocks are forward-looking, so the best news out of Kimberly-Clark was that it raised its earnings outlook for the fiscal year. The company is now guiding a full 5 cents a share higher on either side of its earnings-range target — up to $5.05 to $5.20 from $5 to $5.15 — thanks to better-than-expected sales and lower-than-expected prices for pulp, the key component of tissues and toilet paper.
Shares in KMB popped more than 3% after the report, but the dividend still was yielding a healthy 3.4%.
McGraw-Hill, best-known as the owner of credit ratings agency Standard & Poor’s, clobbered Street estimates by 9 cents a share.
The company is splitting into two business — one for financial information and the other in educational publishing — and it’s looking like a smart move. Greater demand for market data and news drove the better-than-expected bottom line, while weak results from education caused the top-line to miss estimates.
Second-quarter net income rose more than 2% to $216 million, or 76 cents a share, from $211.1 million, or 68 cents, in the year-ago period. On an adjusted basis, earnings came to 85 cents, far better than analysts’ average estimate of 76 cents.
Revenue fell to $1.55 billion from $1.56 billion, hurt by a double-digit percent drop in sales at the education publishing division. Analysts were looking for revenue to increase to $1.59 billion.
However, McGraw-Hill soothed the Street by affirming that its full-year earnings would come in near the high end of its prior guidance of $3.25 to $3.35 a share. That helped propel shares to early gains of almost 4% — and the dependable dividend was still throwing off a solid 2%.
As of this writing, Dan Burrows held none of the securities mentioned here.
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