Is economic growth about to hit a wall and lead us into a period of lackluster results? If that’s your concern, you’re not alone. This growth cycle and its corresponding bull market are, at ten years of age, getting a bit long in the tooth.
In this sort of indecisive environment where rising interest rates, trade wars and the prospect of an old-fashioned recession could turn into trouble, investors tend to reprioritize what the market will reward. Safe consumer stocks move into favor, often at the expense of growth names. Dividend stocks become particularly compelling prospects, with traders seeking out the certainty of reliable cash flow when growth is anything but guaranteed.
To that end, here’s a rundown of 10 of the market’s top dividend-paying consumer stocks to mull as we wade deeper into murky waters.
Procter & Gamble (PG)
Some investors mentally wrote Procter & Gamble (NYSE:PG) off years ago, pegging it as a has-been that got too big for its own good, and too stuck in its old ways to compete well in the modern market.
And to be fair, in some regards the criticisms were on target. Since CEO David Taylor took the helm in 2015, however, things have been different. P&G has been shedding brands and lines that simply aren’t going to bear fruit, and though too slowly for some, the company has reworked its marketing approach to better reflect how most consumers now make purchasing decisions.
Although there’s more work to be done, the yield of 3.2% is solid, and Procter & Gamble has upped its payout for 62 consecutive years.
Philip Morris (PM)
Last year was a rough one for Philip Morris (NYSE:PM) investors. The stock lost a total of 37% in 2018, mostly in response to tepid sales growth of its relatively new IQOS product, though downgrades all throughout the year certainly played a role in the pullback.
The sellers arguably overshot their target though.
While the global smoking cessation movement continues to gain traction and Philip Morris hasn’t been the player it needs to be in the vaping market, this company still owns one of the most recognized and respected brand names in the business. Sales and earnings are projected to improve 2.8% and 5.0%, respectively, this year — pretty good for the smoking industry — and better still, the dividend yield is an impressive 6.3%. Its payout has grown every year since 2008.
Spectrum Brands Holdings (SPB)
Spectrum Brands Holdings (NYSE:SPB) likely won’t ring a bell with consumers, but the company’s brand names will. This is the parent to Remington shaving products, George Foreman grills, Armor All automobile protectant, Tetra fish food and Kwikset door locks, just to name a few.
It was a particularly poor performer in 2018, largely driven lower by downgrades and some restructuring that made it tough to get a bead on the company’s future. But, Bank of America’s Olivia Tong made a good point with her recent upgrade of Spectrum, explaining “SPB’s results have been challenged of late, however, headwinds are abating, while the recent sales of SPB Auto Care and Battery provide much better visibility on de-levering the balance sheet.”
With the sentiment pendulum ready to swing in the other direction again, the dividend yield of 3.1% looks like an opportunity.
Kraft Heinz (KHC)
Kraft Heinz (NASDAQ:KHC) isn’t a name that needs much in the way of an introduction. Its namesake macaroni and cheese, ketchup, pickles and salad dressings are familiar to say the least, as are the brand names some investors are surprised to learn are part of the Kraft Heinz family. This company is also the parent of Kool-Aid, Oscar Meyer, Velveeta and CapriSun, just to name a few.
Its leading brand names haven’t been enough to stave off the pullback from the May-2017 peak near $98 to last month’s low of $41.60. But, it’s not as if revenue and income have been shrinking. Its growth has been tepid, but still moving forward.
The end result is a healthy dividend yield of 5.3% … a dividend, by the way, that’s grown steadily since 2012, even before the merger of Kraft and Heinz.
Packaging Corp of America (PKG)
When most investors look for consumer stocks to buy, they tend to focus on the manufacturer and brand name and look past the organizations that make those products marketable.
Big mistake. That oversight steers investors right past Packaging Corp of America (NYSE:PKG), which makes the boxes and retail displays most shoppers don’t give a second thought.
The big selling feature isn’t the current yield of 3.5%, however, and the fact that the payout hasn’t failed to grow at least a little every year going back to 2010. It’s the fact that newcomers can step into PKG stock so cheaply. Shares are only trading at 10.8 times their past and forward-looking earnings.
Tyson Foods (TSN)
Tyson Foods (NYSE:TSN) has been putting food on tables since 1931, and although it’s much more than just chicken now, its chicken roots are still highly evident.
The past year has been a tough one for shareholders, with fears stemming from a tariff war and rising freight costs pulling the stock well off its December 2017 high near $84. Although it has bounced back from December’s low, the current price near $60 is still miles away from there.
A closer look at Tyson’s results, however, suggests the only thing to fear was the impact of the rhetoric. Sales were up the typical 3% last year, and although earnings slipped from 2017’s $6.16 per share to what will likely be $5.93 per share for 2018, analysts are looking for an earnings rebound to $6.20 per share in 2019. The pullback, in the meantime, has beefed up the yield to a respectable 2.5%.
Anheuser-Busch Inbev (BUD)
Budweiser, Corona and Modelo are just some of the brand names under the Anheuser-Busch Inbev (NYSE:BUD) umbrella. This company is the biggest brewer in the world, sporting 15 different labels and a global presence other beer makers generally don’t want to tangle with.
Its size hasn’t helped the stock much over the course of the past year and a half, with yet-another salvo of downgrades keeping the recent rebound effort in check. After hitting a multi-year low in December, Jefferies lowered its stance on BUD stock to “Underperform” last week, suggesting near-term earnings would come up short of expectations. Around the same time, BofA lowered its price target on Anheuser-Busch Inbev shares from around $69.50 to $65.
The downgrades don’t reflect the fact that the company can and will respond to pressure as needed though. For example, RBC just upgraded Anheuser-Busch Inbev because it refinanced its debt in a way that makes its debt burden more manageable.
In the meantime, newcomers will step into BUD shares at a solid yield of 4.6%.
Hanesbrands (NYSE:HBI) shares have been a terrible performers since early 2015, peeling back from a peak of around $35 in the middle of that year to a low of less than $12 in December of last year. Nothing the company has done has quelled the stock’s bleeding.
Don’t jump to the wrong conclusion though. Sales have grown rather steadily since 2014, as has operating income. It has not been red-hot growth, nor hyper-consistent but certainly better than the stock’s long-term trend suggests.
Regardless of the past, the present and future look healthy enough. HBI shares are only trading at 8.2 times this year’s projected profit, and the trailing yield is just above 4%. This well-recognized brand name has too much going for it to ignore at that kind of valuation.
Avery Dennison (AVY)
Avery Dennison (NYSE:AVY) operates in the same space as Packaging Corp of America, but the two aren’t head-to-head competitors. Avery Dennison tends to cater to the higher-tech end of the spectrum, providing everything from RFID labels to automotive decals to architectural design materials.
Still, demand for its products is tightly linked to consumerism, qualifying it as one of the better dividend-paying consumer stocks to buy. The current yield is a modest 2.2%, but what it lacks in punch it makes up for in growth. The company’s payout has improved every year since 2010.
The kicker: While the stock is down for the past year, it’s still growing on analysts. AVY has been upgraded three times since April, and not downgraded once, and currently sports a collective target price of $114.30. That’s more than 18% better than the current price of AVY, which analysts rate as just a bit better than a “Buy.”
Kimberly Clark (KMB)
Finally, Kimberly Clark (NYSE:KMB) is surrounded by more than a little bit of doubt headed into Wednesday’s earnings report. Some analysts are calling for profit growth, while others expect earnings to shrink. As a group though, analysts don’t even fully consider KMB a “Hold,” and the consensus target price near $107 is below the stock’s current value near $115.5.
Yet, to long-term income-minded investors, that earnings news will have little impact on how well KMB shares will serve them. The current yield of 3.5% is more than respectable, and sales of toilet paper, diapers and paper towels are consistent enough to maintain the company’s streak of 46 years’ worth of annual dividend increases.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.