Church & Dwight, Hormel, Campbell Soup
-- >>> 3 Great Consumer Staples Stocks Flying Under The Radar
By Robert Ciura
May 7, 2013|
Tickers: CPB, CHD, HRL http://beta.fool.com/rciura/2013/05/07/3-great-consumer-staples-stocks-flying-under-the-r/33652/?source=eogyholnk0000001
Most income investors are well-aware of the benefits of dividend investing. Those quarterly checks provide stability and guaranteed returns in an era of high-frequency trading, geopolitical unrest, and volatile markets.
The consumer staples sector in particular is a haven for those who enjoy receiving solid dividend yields. However, while most investors are fully aware of the market’s biggest consumer staples giants, there are a few stocks with much smaller market values, below $15 billion, that might be flying under your radar.
Three great consumer staples companies
Church & Dwight (NYSE: CHD) manufactures and markets a wide range of personal care, household, and specialty products under the Arm & Hammer brand name, as well as others. The company flies under the wings of its mega-cap consumer staples giant peers, but the company’s solid brands and steady operating performance make it worthy of consideration in its own right.
The company has a spectacular track record of distributing profits to shareholders via dividends. The company recently declared its 449th consecutive quarterly dividend payment.
Of course, this long streak of dividend payments can’t be sustained without the underlying operating performance to back it up, which is an area of strength for Church & Dwight that continued during the first quarter. The company reported nearly 13% growth in net sales and 15% earnings per share growth during the first three months of the year versus the same period in 2012.
Hormel Foods (NYSE: HRL) has a market capitalization of $11 billion and a dividend yield of about 1.6%. Hormel was founded in 1891, and has since sold its flagship Spam and Hormel Chili to consumers. However, the company has broadened its product portfolio over the years. The company holds the Jennie-O brand, and earlier this year announced the acquisition of the Skippy peanut butter line.
Hormel has reported steady operating performance, indicative of its solid brands and diversified product portfolio. Recently, the company reported fiscal first-quarter sales of $2.1 billion, representing 4% growth year over year. This was largely attributable to a 2% increase in volumes as opposed to the first quarter of 2012.
Moreover, Hormel has an enviable dividend track record: the company has provided investors an astounding 47 consecutive years of dividend increases.
Campbell Soup (NYSE: CPB) is a $15 billion dollar company with a dividend yield in excess of 2.5%. The company has a long operating history that stretches back more than 140 years. Campbell offers consumers its namesake soup products, as well as a diversified portfolio, including the Pepperidge Farm and V8 brands. Although revenues and earnings were basically flat in 2012 versus 2011, Campbell did come through with a dividend increase.
In February, the company offered investors a solid quarterly report. Sales grew 10% during the second quarter to $2.33 billion. In addition, the company reported that its adjusted earnings per share increased 8% during the first half of the year.
The Foolish bottom line
These stocks provide the best of what the consumer staples sector has to offer: reliable sales and profits, as a result of products that are sold no matter the condition of the broader economy. In turn, investors also receive those quarterly dividend payments that are so valuable to income investors.
It’s worth noting that each of these stocks carries a trailing price-to-earnings ratio that is near or exceeds 20 times, a level that is above the P/E ratio on the broader market. The S&P 500 Index currently trades for roughly 18 times earnings, meaning these stocks are slightly more expensive than the broader market.
However, these companies have smaller market capitalizations than their juggernaut competitors and predictable business models that justify their higher valuations.
In addition, Hormel, Church & Dwight, and Campbell have extremely long histories of paying (and raising) payouts to shareholders. For investors interested in the consumer staples sector who are bored with the usual suspects, these under-the-radar, high-quality companies are worth a closer look.