Article: Dividend Stock Picks on the Defensive
The next article in my “Fool Revisited” series continues on with the “dividends make some stocks good investments” angle, though this time the dividend stocks are from the “consumer goods” sector. This leads me to believe that it was the assignment from that sector class, and apparently I liked charts and screening so much, I did it yet again. It looks like I just looked at yield within the sector, than broke it down further by “recommending” a stock from different commodity groups. Not nearly as sexy as my multi-screen factor articles, but it met the mail for my assignment.
The screening criteria for this particular article used four different factors: dividend yield over 5%, a payout ratio less than 100%, return on equity over 20%, and a sustainable growth rate over 5%. The five “sustainable” dividends in question came from four different industries, leading me to believe this article was more about income investing, but as you will see from some future articles, I went back to the “best dividends” thing when writing about some industries too.
Must have felt like the world needed to see this article, so here’s the ancient tweet announcing its arrival:
I simply picked the highest yielders from each of my subgroups and gave them a little pitch: Kimberly-Clark (NYSE: KMB) won the coveted title from the group of “stuff you always need. Unilever (NYSE: UL) won the “staple foods” category. And Dr Pepper Snapple Group (NYSE: DPS) beat out Coca-Cola and Pepsi among drink stuffs.
On average, those three companies failed to beat the S&P 500, though it would have been pretty close. Here’s how the three companies fared individually – using the compound annual growth rate (CAGR) and total growth – versus the S&P 500 from article publication (September 29, 2011) through January 12, 2018:
| Stock | Start Price | End Price | CAGR | Total Growth | Value of $10,000 |
| Kimberly-Clark | $55.76 | $112.98 | 11.87% | 102.62% | $20,262 |
| Unilever | $25.82 | $54.52 | 12.61% | 111.15% | $21,115 |
| Dr Pepper Snapple Group | $32.08 | $95.24 | 18.88% | 196.88% | $29,688 |
| S&P 500 | $1,160.40 | $2,786.24 | 14.93% | 140.11% | $24,011 |
Source: Yahoo! Finance & author calculation; Stock prices include dividends & stock splits
Consumer staples tend to be decent investments in general. The thought is that even in troubling economic times, people will still have to buy the things they need to live in the world, like food, hygiene products, diapers for the kiddos, and whatever else. They may not always give you market-beating returns, but they will at least protect your money a little bit if you choose to invest. I would have no problem investing in any one of these companies, though they would probably be towards the bottom of any watch list depending on my needs for the money.
Until next time…
Disclaimer: I do not own currently own shares in any of the mentioned companies, and I have no plans to purchase shares of either company within the next 60 days in any account in which I manage investment funds. You can read a little about my personal investment philosophy here.
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