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With so many highly acclaimed dividend growth stocks at or near their 52 week highs, a quandary arises for the investor concerned with value and future growth prospects. Some of these dividend aristocrats look to be overweight. I have had my eye on these two stocks for some time now and I believe them both to be in advantageous situations based on their current price evaluations and growth potentials. I consider both Coke (NYSE:KO) and McCormick (NYSE:MKC) to be best in breed in their respective markets. They both have been on the rise recently; McCormick more than Coke, but I see no headwinds to slow this trend, especially when considering the stocks for the long term. Both companies pay a healthy increasing dividend and have done so for decades (27 years for McCormick, 50 years for Coke). I like both stocks because of their recognizable brand names, their wide moats, and the fact that their goods will be sought after by a growing middle class the world over.

KO Chart
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KO data by YCharts

Coca-Cola

Company Overview:

KO boasts over 3500 products which are available in over 200 countries worldwide. The Coca-Cola company consists of 16 $1 Billion brands, two of which, I LOHAS water and Ayataka green tea, were acquired in 2012. This 126 year old company is no old hat; its marketing campaign is focused on new age social media techniques with have earned Coke nearly 64,000 followers on Twitter and 62,000,000 "Likes" on Facebook (NASDAQ:FB). The company's Youtube channel has accumulated over 3.3 million views. Coca-Cola is widely viewed as the world's most recognizable brand. This perception is unlikely to change with the company's forward thinking in terms of its products, its methodology, and its broad marketing focus.

Dividend Information:

Many investors view Coke as a lumbering behemoth. I think this is why the stock's price appreciation has stalled since July, 2012 when it hit its 52 week high of $40.66. This stock isn't exactly exciting; the company continually does what it's supposed to do: produce and distribute non-alcoholic beverages, and it does it well. Recently, after the announcement of its latest dividend increase of 9.8% which exceeded the general perception of 7-8% which would have fallen in line with its 5 year dividend growth rate of 8.45%, the stock price has begun to rise. This beat on the dividend increase has given the market a renewed confidence in KO. Since the February 21st dividend announcement the stock has risen over $2/share.

KO has paid a quarterly dividend since 1920. More impressively, the company has increased its dividend for 50 consecutive years. In my mind, Coke is synonymous with accountability. This is the sort of sentiment that I like to have for a company when putting my money up against the inherent risks of owning common stock. Coke currently distributes a quarterly payment of $0.28 per share. At its current evaluation of $40/share, KO's yield is 2.8%.

But, there are more positive attributes to this stock than its continually growing dividend. As stated, the Coca-Cola brand is solidly established and while KO does have respectable competitors in its industry, namely PepsiCo (NYSE:PEP) and the Dr. Pepper Snapple Group (NYSE:DPS), I would confidently name KO the dominant player with the widest and most effective moat. This is in regards to its beverages; PepsiCo offers stock owners exposure to snacks, a business segment that KO has not ventured into. But, even so, I like Coke as a pure beverage play. I also fear that a health conscious consumer base will hurt PepsiCo's snack business before it will hurt soda sales. I think that it is much easier to replace an unhealthy snack with a granola bar or a fruit cup than it is for loyal fans to put down their favorite sugary drinks.

I focus on the health food issue because I think this has also played a major role in KO's recent stock price stagnation. In the second half of 2012 the stock lagged behind its technical upward trend. During this period of time sugary drinks have come under attack in large scale by the media, highlighted by New York City's Mayor Bloomberg and his proposed anti-sugary drink policies. This negative coverage of the industry seems to have looked over KO's still-beverage growth and alternative healthy sweetener initiatives. I must admit that I too bought into this healthy drink hype fearing that a dramatic shift in consumer sentiment could really damage this stalwart company for dividend growth investors. However, after following this recent climb towards a new 52 week high and looking over the company's earnings releases and 2012 shareholder report, I feel great about KO's future prospects.

Volume Growth Statistics:

In lieu of my previously stated fears concerning the health food phenomenon's ability to erode KO's sales, I focused on the company's 2012 volume figures. Needless to say, I was impressed. KO has a 2020 growth mission and boasts confidently that these numbers fall in line with their long term goals. KO's 2012 total volume experienced global growth of 4%. Its major brand, Coke, grew 3%; Fanta increased its volume by 5% while Sprite grew 4%.

In line with its 2020 mission, the company's volume growth numbers in emerging markets increased greatly in 2012: Thailand (total: 22%; sparkling: 31%), India (total: 16%; sparkling: 33%), and Russia (total: 8%; sparkling: 20%). KO also experienced volume growth in its major markets with 2% growth in North America and 2% growth in Japan.

KO is no longer strictly a soda company. Coke has many world health initiatives; the company has seen the writing on the wall in terms of a changing perception among its consumers both in the United States and internationally who are becoming more and more interested in a health conscious diet.

Including acquisitions, full year still beverage volume grew 10% (packaged water, tea, coffee, juices/juice drinks, sports drinks, and energy drinks). The company highlights its ready-to-drink tea volume growth of 14% (16% YoY growth during the 4th quarter) driven by key brands Gold Peak and Honest Tea in North America, Ayataka green tea which is popular in Japan, and Fuze Tea which is rapidly expanding worldwide.

KO's packaged water volume growth was impressive at 12% with growth spurred by its PlantBottle PET packaging which has a strong presence in 10 countries, representing more than 50% of the company's global packaged water business.

Full year energy drink volume increased by 20% helped by a strong 4th quarter (12% YoY).

And although this information isn't volume related, I think it's worth mentioning that Berkshire Hathaway Inc. (NYSE:BRK.B) owns 400,000,000 shares of Coke (8.9% of KO's outstanding shares). Knowing that Warren Buffett and his team at Berkshire have not lost confidence in Coke bolsters my own feelings in regard to this stock.

McCormick:

Right now, McCormick stock intrigues me. I started a position with this company's shares in late January when the stock price plummeted after an earnings release. I know the company trades at a high P/E multiple: 23.8x, but even after looking over the company's financials I didn't see any reason for this drastic sell-off. Not only did the company meet general expectations, but it hit all time highs as far as sales and profits go. Since purchasing shares in the $61 range, share price has steadily risen to a new 52 week high of $72.24. I have been tempted to take profits off of this trade but after having reviewed the company's fundamentals, growth prospects, and MKC management's plan for the company, I have decided to stay long on the stock. I will say that before jumping right into a new position with McCormick, I would consider waiting for its next earnings release on April 2 because if this release is anything like the company's previous, it could present investors with another opportunity to pick up MKC shares at a more valuable price. However, this strategy presents an entry point risk for a potential buyer because if McCormick recent trend continues, this could be a $75 stock by the time April 2 rolls around.

Dividend and Shareholder Return:

The main reason I've decided to maintain my long term position with MKC is its shareholder return figures. MKC's management is dedicated to rewarding its shareholders. The company's 10 year annual shareholder return of 13% outpaces both the S&P 500 (6%) and the S&P food group (9%). The company has returned $297 million to shareholders in 2012 through an increased dividend and a share buyback program, bringing its 5 year cumulative total of returns to nearly $1 billion. This most recent increase of its quarterly dividend (+10%) was the company's 27th consecutive annual increase. The company's 5 year dividend growth rate is 9.16% and the company's current payout ratio is a healthy 41.3%.

McCormick quarterly dividend is $0.34/share and at its current share price the stock yields 1.88%.

Company Sales Growth:

I also feel very confident about the company's current sales growth trends. MKC sales increased by 9% in 2012. This allowed for the company to achieve a revenue milestone of $4 billion. 10 years ago in 2002 McCormick celebrated a similar milestone: $2 billion in sales. MKC's acquisitions, cost efficiency maneuvers, brand marketing, an expanded product line and distribution system enabled this $9.6 billion market cap company to double its yearly revenues in just 10 years.

MKC also hit a net income milestone in 2012 with over $400 million in profits. Operating income increased 7% in 2012 boosted by the company's higher sales figures as well as the success of its Comprehensive Continuous Improvement program, "CCI" ,which produced $56 million in cost savings during the year. This CCI program has enabled McCormick to grow sales by 7%, EPS by 9%, and cash from operations by 10% on its 10 year compounded annual rate.

Meeting another benchmark, the company's EPS surpassed $3.00 a share for the first time, coming in at $3.04 for the year. MKC also set an advertising record spending $198 million on brand marketing support in 2012. Digital advertisements played a key role in this increased marketing strategy as MKC increased its online exposure to 12% of total marketing, up from 4% in 2010. The company expects this percentage to reach 20% during this current calendar year.


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MKC EPS Diluted Quarterly data by YCharts

MKC is focused on international and emerging market growth. In 2012, 14% of McCormick total sales came from emerging markets. As a part of its global growth initiative, the company has set a goal to reach 20% in 2015. The company expects to achieve these goals with increased international brand marketing and the continuance of its historically effective acquisition strategy.

Innovation:

MKC has introduced approximately 450 products into the market since 2011. The company expects these products to account for over 10% of company sales by 2015. This dedication to product innovation is another positive aspect that I see in MKC. The company already has a stranglehold on the spice market; the spice isles in several of my local grocery stores are seemingly dedicated to McCormick products. If Coca-Cola is synonymous with accountability, McCormick is king of the modern spice trade.

Like Coke, McCormick also understands the growing interest of its costumers concerning health foods. Over 30% of these new products offer consumer health attributes. MKC has also reached a recent deal with the U.S. School lunch program regarding its lower-sodium versions Lawry's spices which meet new standards being enforced by the U.S. Department of Agriculture. The company is focusing on salt-free and reduced sodium products to meet the expectations of its more health conscious clientele.

Acquisitions:

McCormick states that it achieves roughly 33% of its sales growth through acquisitions. In 2012, MKC made headlines with the announcement of an agreement to acquire the Wuhan Asia Pacific Condiment, which is known for its success in central China. Management believes this move will complement its already existing products being marketed in China and expects that once this deal is completed, its Chinese sales will increase by more than 60%. In its annual shareholder report, the company boasts of other potential acquisition opportunities to continue its strong sales growth trend.

All information taken from these company's earnings reports, annual shareholder reports, and investor relations tabs on their respective websites.

Source: 2 Consumer Staple Dividend Growth Aristocrats With Strong Growth Catalysts