The consumer goods industry has been one of the most stable industries during the pandemic, owing to the demand inelasticity of the sector’s products. In fact, the industry witnessed surging demand in the initial days of the pandemic, with people panic shopping and hoarding essentials.
As a result, dividend-paying companies in the industry have been able to maintain their dividend payments despite the pandemic’s disruptions. Also, market uncertainty and the Fed’s accommodative monetary policy have helped dividend yielding stocks deliver decent returns. This is evident from SPDR S&P Dividend ETF’s (SDY) 34.3% returns over the past nine months.
As economic uncertainty is expected to continue until coronavirus vaccines begin to contain the pandemic, and as the Fed is not expected to raise the interest rates anytime soon, it could be wise to bet on consumer stocks like Unilever PLC (UL), Altria Group, Inc. (MO) and Newell Brands Inc. (NWL) that currently offer better than a 3% dividend yield.
Unilever PLC (UL)
UL is a fast-moving consumer goods (FMCG) company operating in the three segments: Beauty & Personal Care, Foods & Refreshment, and Home Care. It develops and markets products for skin care and hair care, oral care, package food items such as sauces, snacks, home care products and beverages.
In November, UL signed an agreement to acquire SmartyPants Vitamins, a U.S.-based vitamin, mineral and supplement company. This acquisition will underpin the company’s commitment to improving people’s health and well-being and halving the environmental impact of their products.
UL pays $1.83 in dividends annually, yielding 3.02% on its current price. It paid a dividend of $0.48 on October 29, 2020.
Even though Covid-19 continues to influence consumer behavior and channel dynamics in the markets, UL was able to generate a turnover of €12.93 billion in the third quarter ended September 30, 2020. Emerging markets have accounted for 57.4% of the total revenue generated during the quarter, while developed economies contributed 42.6%. UL’s underlying sales have grown 4.4% year-over-year over the same period.
Analysts expect UL’s revenues to grow 8.8% year-to-year to $62.38 billion in the fiscal 2020 (ended December 31). The consensus EPS estimate of $3.12 for the fiscal 2021 (ending December 31) indicates a 17.1% improvement year-over-year. Furthermore, analysts expect UL’s EPS to grow at a rate of 6.9% per annum over the next five years. UL has gained 8.8% over the past six months.
How does UL stack up for the POWR Ratings?
A for Trade Grade
A Buy & Hold Grade
A for Peer Grade
B for Industry Rank
A for Overall POWR Rating.
It is currently ranked #3 of 52 stocks in the Consumer Goods Industry.
Altria Group, Inc. (MO)
MO manufactures and sells cigarettes, smokeless products, and wine in the U.S. The company sells its tobacco products primarily to wholesalers, including distributor and large retail organizations, such as chain stores. In addition, it provides finance leasing services primarily in transportation, power generation, real estate, and manufacturing equipment industries.
Earlier in December, the U.S. Food and Drug Administration (FDA) authorized commercialization of the next generation of its tobacco heating system device, IQOS 3. This upgrade offers several enhancements, including a longer battery life and faster re-charging time, which will help attract a larger volume of potential customers. On December 8, MO was awarded a double ‘A’ rating by CDP for tackling climate change and protecting water security. This recognizes the company’s standard of corporate environmental transparency and efforts in addressing sustainability challenges.
MO pays $3.44 in dividends annually, yielding 8.44% on its current price. It has a payout ratio of 79.1%. The company’s dividend payments have grown at a CAGR of 9.4% over the past five years.
MO’s revenues have increased 3.9% year-over-year in the third quarter ended September 30, 2020 to $7.12 billion. Its operating income increased 7.3% year-over-year to $ 3.16 billion over the same period, while EPS improved 63.3% year-over-year.
Analysts expect MO’s revenues to grow 3.3% year-over-year to $4.96 billion in the fourth quarter ended December 31, 2020. The consensus EPS estimate of $4.37 for fiscal 2020 (ended December 31) indicates a 3.6% improvement year-over-year. The company has an impressive earnings surprise history; it beat the Street EPS estimates in three of the trailing four quarters. MO has gained 3.5% over the past six months.
MO is rated a “Buy” in our POWR Ratings system. It has a “B” for Trade Grade, Buy & Hold Grade, and Industry Rank. In 9-stock Tobacco Industry, it is ranked #5.
Newell Brands Inc. (NWL)
NWL engages in addressing consumer and commercial products solutions worldwide. The company operates through four segments: Appliances and Cookware, Food and Commercial, Home and Outdoor Living, and Learning and Development.
In November, NUK, a part of NWL family, expanded its brand beyond products to provide resources for parents nationwide with the launch of an expert resource hub. NWL introduced the 3AM Club in a new partnership with March of Dimes to provide skilled parenting advice and tools for parents seeking support.
On December 1, Sunbeam, a part of NWL family, launched a new portable heating pad to help relieve pain and treat sore muscles. The cordless heating pad provides consumers with a customizable, safe, and convenient option to better manage their pain. NWL pays $0.92 in dividends annually, yielding 4.1% on its current price. It has a payout ratio of 54%. The company’s dividend payments have grown at a CAGR of 3.9% over the past five years.
NWL’s net sales have increased 5.1% year-over-year to $2.70 billion in the third quarter ended September 30, 2020. Its non-GAAP operating income has increased 22.9% year-over-year to$403 million over the same period, while its non-GAAP EPS improved 15.1% year-over-year to $0.84.
Analysts expect NWL’s revenues to grow 4.5% year-over-year to $1.97 billion in the current quarter ending March 31, 2021. The consensus EPS estimate of $0.47 for the fourth quarter (ended December 31, 2020) indicates an 11.9% improvement year-over-year. The company has an impressive earnings surprise history as well; it beat the Street EPS estimates in each of the trailing four quarters. NWL has gained 41.6% over the past six months.
NWL’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Peer Grade and Buy & Hold Grade, and a “B” for Industry Rank. Among the 68 stocks in the Home Improvement & Goods Industry, it is ranked #6.
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UL shares were unchanged in after-hours trading Thursday. Year-to-date, UL has declined -0.89%, versus a 1.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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