5 Sweet Stocks for Steady Income

by Alyssa Oursler | August 29, 2012 2:00 pm

The S&P 500 is looking at 12% gains year-to-date, but you’d never know it by the way investors are going about their business. Economic jitters across the globe and here at home have shepherded investment dollars into an array of income equities, from dividend stocks to bonds, as we all hunker down and wait for the worst to come.

Can’t we just indulge ourselves a little bit?

It turns out you can — all while staying defensive! Whether they’re dishing out candy, cola or anything else you shouldn’t have before dinner, many stocks that deal in sugary treats also hand out some sweet dividend checks.

We’ve got five mouth-watering picks that also should put money in your pockets every quarter — and in the spirit of not loading up too much on junk, we’ve also got a couple sugary stocks to keep on the shelf:

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Hershey HSYDividend Yield: 2.1%

Hershey (NYSE:HSY[2]) has a lot to offer — and not just in terms of satisfying snacks for your sweet tooth.

The company, which is the clear leader of the North American candy market with more than 80 well-known brands, has a $16.4 billion candy business that generates more than $6 billion in revenue annually. Hershey boasts 11 consecutive quarters of revenue growth, and 8 straight quarters of earnings growth.

HSY also Jon Markman’s pick[3] in InvestorPlace‘s Ten Best Stocks of 2012[4] contest, and currently is teetering between third and fourth place with market-beating 17% gains.

While Hershey did stall dividend growth[5] through the financial crisis (can it be blamed?), it has increased its quarterly payout 27% since 2009 and has been steadily rewarding investors since 1930. Plus, in the short term, Hershey shouldn’t be slowed drought-fueled food-price hikes like many other companies, as the costs of sugar and cocoa actually have fallen in recent months.

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J.M. Smucker Co.

J.M. Smucker Co. NYSE:SJMDividend Yield: 2.5%

It doesn’t have to be candy to be sweet. If you’re looking to mix things up a bit, try J.M. Smucker Co. (NYSE:SJM[6]) — a company best-known for its namesake jams and jellies, but that also produces popular Jif peanut butter and Pillsbury-brand flour, as well as other foods.

Despite rising commodity costs — the price of peanut butter has jumped in the past year — the 115-year-old giant is still doing well. SJM beat earnings expectations[7] in its most recent quarter, revenue growth of 14% continued a multi-year streak of improvement — partially helped by recent purchases of Sara Lee’s North American coffee business and Rowland Coffee Roasters. Shares have rebounded after an early-year slide to a 9% year-to-date gain.

While you shouldn’t expect another massive special dividend like the 2008 payout made coming off the buyout of Folgers, J.M. Smucker has been sweetening its regular check to the tune of 50% since 2009. SJM pays out 52 cents quarterly, good for a 2.5% yield, and has been writing checks uninterrupted for 60 years — making it another steady income company that can fill your belly and your wallet.

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Pepsico (NYSE:PEP)Dividend Yield: 3%

All that food might get you thirsty, though. Lucky for you, PepsiCo (NYSE:PEP[8]) offers a great blend of drinks and snacks — from its sweet namesake cola, Gatorade sports drinks and Tropicana juices to Lay’s potato chips and Cap’n Crunch cereal.

This is another big-name, global company — it has a market cap of over $100 billion and has operations on five continents — that has plenty to offer investors.

PepsiCo’s dividend yield, for one, is an attractive 3%. Its 54-cent quarterly payout has increased every year for decades, including 25% dividend growth since 2009, and it has made payouts since 1952.

Yes, revenue and profits fell last quarter as the company faced struggles with re-franchising and commodity prices, but for now, that represents more anomaly than trend. It remains to be seen how much surging corn prices will hurt on PepsiCo, but investors can’t be too worried about PEP, as shares have steadily climbed a market-beating 16% year-to-date.

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Dr. Pepper Snapple

Dr Pepper Snapple DPSDividend Yield: 3%

Dr Pepper Snapple (NYSE:DPS[9]) is smaller than Pepsi and doesn’t have quite the product breadth, but it does toss out a dividend as sweet as Pepsi’s.

The company, which makes Sunkist, 7-Up and Dr Pepper-brand soft drinks, beat earnings estimates in the second quarter and also maintained its outlook, shrugging off the same problem of rising corn costs. While Dr Pepper’s sales growth in the past few years hasn’t been huge, it sure has been steady. Revenue has increased year-over-year for 10 consecutive quarters.

DPS is the newest of this group to the dividend-paying game, only initiating a dividend in late 2009 — but it has more than doubled its original 15-cent payout to a current 34 cents per share.

Also of note: Dr Pepper Snapple only operates in the U.S. right now — meaning there’s huge growth for potential should it ever choose to branch out.

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Nestle (OTC:NSRGY)Dividend Yield: 3.3%

Prefer something with an international flavor? Take a nibble of Switzerland’s Nestle (PINK:NSRGY[10]).

While known for its Crunch bars, Nestle is more than just candy — it sells cereals, juices, frozen foods, baby foods, coffee, ice cream and includes popular brands like Nescafe, Jenny Craig, Haagen-Dazs, PowerBar and Carnation — making it a global foods powerhouse worth more than $200 billion by market cap.

So far this year, shares of NSRGY — which trade as ADRs listed on the pink sheets — have gained around 9%, though growth has been stagnant for the past couple years.

Still, Nestle offers a hefty dividend, paid annually — last year’s $2.105 per share represents dividend growth of 75% since 2009, and yields roughly 3.3% based on today’s prices — and has issued payouts for more than two decades.

Feel free to load up on these past five sweets, just make sure to ignore …

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Sweets to Stay Away From

Too many sweets can be a bad thing, even if they come with a hearty dividend. That’s why investors should avoid two dividend-paying confectioners — Rocky Mountain Chocolate Factory (NASDAQ:RMCF[11]) and Tootsie Roll (NYSE:TR[12]).

Sure, Rocky Mountain has an attractive 3.4% dividend that bests the previous picks, but that payout has only recently been increased — this year, from 10 cents to 11 — after almost five years of stagnation. Meanwhile, Tootsie Roll’s dividend, while long-standing, is, at 1.2%, just as tempting as its candies (which is not at all, if you ask me).

On top of that, both stocks are very thinly traded. TR’s average volume is roughly 75,000 shares traded, while RMCF is an even more anemic 25,000. Even though buy-and-hold investors won’t be trading them frequently, low-volume stocks[13] still should be handled with care.

Besides, if your goal is a long-term play providing a steady check, there’s far less speculative plays (like Warren Buffett favorite Coca-Cola (NYSE:KO[14]), another sweet dividend stock) to be had. After all, sweets are best enjoyed while relaxing.

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.

  1. Compare Brokers: https://investorplace.com/options-trading/broker-center/
  2. HSY: http://studio-5.financialcontent.com/investplace/quote?Symbol=HSY
  3. Jon Markman’s pick: https://investorplace.com/2012/05/even-chocolate-haters-should-love-hershey/
  4. Ten Best Stocks of 2012: https://investorplace.com/best-stocks-for-2012/
  5. did stall dividend growth: https://investorplace.com/2012/07/buy-hershey-stock-but-not-for-the-dividend/
  6. SJM: http://studio-5.financialcontent.com/investplace/quote?Symbol=SJM
  7. SJM beat earnings expectations: https://investorplace.com/2012/06/j-m-smucker-trumps-q4-earnings-estimates/
  8. PEP: http://studio-5.financialcontent.com/investplace/quote?Symbol=PEP
  9. DPS: http://studio-5.financialcontent.com/investplace/quote?Symbol=DPS
  10. NSRGY: http://studio-5.financialcontent.com/investplace/quote?Symbol=NSRGY
  11. RMCF: http://studio-5.financialcontent.com/investplace/quote?Symbol=RMCF
  12. TR: http://studio-5.financialcontent.com/investplace/quote?Symbol=TR
  13. low-volume stocks: https://investorplace.com/2012/04/penny-stocks-low-volume-trumps-balance-sheets/
  14. KO: http://studio-5.financialcontent.com/investplace/quote?Symbol=KO

Source URL: https://investorplace.com/2012/08/5-sweet-stocks-for-steady-income-2/
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